The National Australia Bank Ltd (ASX: NAB) share price outperformed the S&P/ASX 200 Index (ASX: XJO) in March.
In fact, NAB shares almost doubled the return of the ASX 200.
The NAB share price climbed by almost 12% in March, ending the month at $32.35. That compares favourably to the return of the ASX 200, which rose by just over 6%.
A lot has happened over the past month. Most of the global headlines have been dominated by the Russian invasion of Ukraine.
War can unsettle markets. But there has also been speculation about what will happen with interest rates to combat widespread inflation.
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What happened in March?
There was only one market-sensitive piece of news from NAB during the period.
Towards the end of March, the big four ASX bank announced it had completed its $2.5 billion on-market share buyback and announced a further on-market buyback of up to $2.5 billion. The NAB share price edged slightly higher by the close of trade on the day of the announcement.
NAB said it had bought back almost 87 million ordinary shares. The additional buyback would bring the total potential combined size of the share buyback to $5 billion.
The further buyback will allow NAB to continue managing its common equity tier 1 (CET1) capital ratio towards its target range of 10.75% to 11.25% over time.
NAB noted that it continues to "operate well above" APRA's unquestionably strong benchmark of 10.5%, under current APRA capital standards. It had a reported CET1 capital ratio of 12.4% as at 31 December 2021.
The further buyback is expected to reduce the bank's CET1 capital ratio by approximately 58 basis points. Its pro forma CET1 capital ratio as at 31 December 2021, reflecting that further buyback and other adjustments, is 11.3%.
Subject to market conditions, NAB expects to commence the further buyback after the release of its FY22 half-year result announcement on 5 May.
When the additional buyback was announced, NAB CEO Ross McEwan said:
Our capital management strategy reflects the importance of maintaining a strong balance sheet through the cycle while allowing us to continue to support growth and deliver improved shareholder returns.
The further $2.5 billion on-market buyback announced today supports our ambition to reduce the share count and increase sustainable ROE (return on equity) benefits for our shareholders.
What do brokers make of the NAB share price?
One of the latest brokers to give an opinion on the bank is Morgan Stanley, which is "equal weight" on NAB, with a price target of $31.50.
The broker is expecting the Reserve Bank of Australia (RBA) to increase interest rates, which will help NAB. However, some negatives may offset the benefit, such as more expensive funding and strong competition in the lending space. Morgan Stanley likes NAB compared to some other banks in the sector.
On Morgan Stanley's numbers, the NAB share price is valued at 17x FY22's estimated earnings with a projected grossed-up dividend yield of 6.2%.
