NAB share price under $20, is it a buy?

The National Australia Bank Ltd (ASX:NAB) share price is under $20, is it now a buy because it's too cheap to ignore?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The National Australia Bank Ltd (ASX: NAB) share price is now under $20, is it a buy now because it's too cheap to ignore?

The last time that NAB was under $20 for a sustained period was during the GFC. It's almost being priced as the worst time during the GFC. Investors are not confident on the banks at the moment!

NAB and Australia and New Zealand Banking Group (ASX: ANZ) are the two major banks which are more focused on businesses and Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) which are focused more on the mortgage market.

There are worries that small and medium business cashflow is going to dry up and therefore they may be unable to make the required repayments to banks such as NAB. There is definitely a risk of this happening.

But don't forget three important things:

  • Healthy CET1 ratio: APRA has been asking banks to build up their CET1 ratio to 10.5% or above for a long time so that they are 'unquestionably strong' in a situation just like this one which is developing. It doesn't mean that banks won't see a hit to profits, but it should mean NAB can ride through this easier than other international banks.
  • Government support: The Australian government is working on a package to support Australian small and medium businesses, as well as the wider community and the healthcare system. It's not going to be providing enormous support, but it will hopefully be enough to make a big enough difference for NAB and the economy.
  • This is a oneoff: The outbreak was painful in China and now it's turning into sizeable numbers in several countries. But at some point the outbreak will slowdown and things will go back to normal. Hopefully sooner rather than later.

Foolish takeaway

NAB is now trading at 9x FY22's estimated earnings. I think we need to look to FY22 as the first normal year, but who knows what's going to happen in between? The NAB share price is definitely cheap, perhaps too cheap, but it may drop even lower if Australia has a similar outbreak to Italy. I'd wait a little longer to buy, though I've got my eyes on other dividend shares.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

Shocked office worker staring at computer screen with colleagues working in the background.
Bank Shares

The ASX bank share beating CBA in 2025

Many investors might not realise this smaller bank stock is leading the pack this year. 

Read more »

man thinking about whether to invest in bitcoin
Bank Shares

Here's what needs to happen for the CBA share price to try and reach $200

What could drive the CBA share price higher?

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Bank Shares

Why now could be an opportune time to sell CBA shares

A leading expert offers his verdict on the outlook for CBA shares.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Bank Shares

The Westpac share price is a buy – UBS

The broker is optimistic on Westpac shares.

Read more »

Bank building with the word bank on it.
Bank Shares

The biggest buyers and sellers of ASX 200 bank stocks revealed

Macquarie breaks down who’s been buying and who’s been selling the ASX 200 bank stocks.

Read more »

A young woman sits with her hand to her chin staring off to the side thinking about her investments.
Resources Shares

Should I switch my ASX 200 banking stocks for ASX 200 miners before earnings season?

The ASX 200 Index is dominated by Australia's bank and materials/mining sectors, which together account for around half of the…

Read more »

A man sits in contemplation on his sofa looking at his phone as though he has just heard some serious or interesting news.
Bank Shares

Here's when Westpac says the RBA will now cut interest rates

The RBA surprised everyone by keeping rates on hold last week. So, when will the next cut happen?

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Bank Shares

This is the ASX bank stock with the largest dividend yield right now

Looking to ASX bank stocks for dividend income right now?

Read more »