National Australia Bank Ltd (ASX: NAB) shares have delivered market-beating returns over the past year.
And the S&P/ASX 200 Index (ASX: XJO) bank stock is putting in another strong run today.
NAB stock closed Friday trading for $36.94 a share. In afternoon trade on Monday, shares are swapping hands for $37.48 apiece, up 1.5%.
As you can see on the chart below, this puts shares in the big four bank up 29.4% over the past 12 months.
That's some solid outperformance for NAB, with the ASX 200 having gained (an also impressive) 17.6% over this same period.
And let's not forget the dividends.
Over the past full year, NAB paid out two fully franked dividends totalling $1.68 a share.
If we add that back into today's share price, then the accumulated value of NAB shares has gained 35.2% in 12 months, with potential tax benefits from those franking credits.
These strong results come despite NAB stock tumbling 6.8% last week. That sell-off appears to have been driven by investors selling their ASX bank stocks in favour of ASX mining stocks after China unveiled significant new stimulus measures that sent copper and iron ore prices surging.
That's the recent price action for you.
Now, here's why Medallion Financial Group's Stuart Bromley has a sell rating on NAB shares (courtesy of The Bull).
Image source: Getty Images
Time to sell those NAB shares?
Bromley pointed out that NAB shares gained 22% between 2 January and 26 September, when they closed at $37.61.
Which brings us to the first reason he has a sell rating on the stock.
"Revenue in the first half of fiscal year 2024 was down 3.7% on the prior corresponding period and cash earnings were down 12.8%," he said.
For the half year, NAB reported cash earnings of $3.55 billion. This was impacted in part by a 5.8% year on year increase in the bank's operating expenses. Those reached $4.68 billion for the six-month period.
Which brings us to the second reason you may want to sell your NAB shares today.
"The net interest margin decreased by 5 basis points to 1.72% Possible future interest rate cuts may also squeeze margins," Bromley said.
It remains to be seen whether the Reserve Bank of Australia will follow the US Federal Reserve in cutting interest rates this year. But whether the RBA holds tight in 2024 or not, with inflation in Australia continuing to edge lower, rate cuts in 2025 are looking very likely.
As for the third reason to consider selling your NAB shares today, after the big 12-month run higher, the ASX 200 bank stock is now trading at a price-to-earnings (P/E) ratio of approximately 17 times.
"We believe the shares are trading at a premium, so investors may want to consider cashing in some gains," Bromley said.
