Why this expert says it's time to sell NAB shares

Are NAB shares a sell heading into 2025?

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National Australia Bank Ltd (ASX: NAB) shares can't escape the broader selling action in the Aussie market today.

Shares in the S&P/ASX 200 Index (ASX: XJO) bank stock closed yesterday trading for $37.99. In afternoon trade on Thursday, shares are changing hands for $37.24 apiece, down 1.97%.

For some context, the ASX 200 is down 1.8% at this same time.

Created with Highcharts 11.4.3National Australia Bank PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

Despite today's retrace, as you can see on the chart above, stockholders will have little reason to complain about their returns over the past year.

Over the past 12 months, NAB shares have gained around 23%. And that doesn't include the $1.69 in fully franked dividends eligible shareholders will have received over the year.

But amid ongoing competition in Australia's mortgage market and the potential for increased bad debts in 2025, Bell Potter Securities' Christopher Watt believes now may be the right time to sell the big four bank (courtesy of The Bull).

Time to take profits on NAB shares?

"The full year 2024 result aligned with expectations, but underlying signals raise concerns, according to our analysis," said Watt, who has a sell recommendation on NAB shares.

Highlighting those concerns, Watt said:

While cost efficiencies offset marginally higher bad debts and softer revenue, the bank's premium valuation looks vulnerable. Modest net interest margin pressure and rising non-performing exposures highlight risk.

With Watt forecasting more downside risk for NAB shares than upside risk heading into 2025, he said, "In this environment, NAB's upside appears limited, while selling protects against potential downside."

What's been happening with the ASX 200 bank stock

NAB held its annual general meeting (AGM) yesterday, 18 December.

Commenting on the year-on-year decline in FY 2024 earnings that threw up some headwinds for NAB shares, CEO Andrew Irvine, who replaced Ross McEwan at the helm earlier this year, said:

Cash earnings for the year were $7.1 billion, 8.1% lower than the strong levels of financial year 2023 due to lower revenue and higher costs. In the second half of the year, a more stable operating environment has seen margin pressure ease.

Other core financial metrics that slipped from FY 2023 included a 2% decline in revenue to $20.65 billion, while statutory net profit fell by 6.1% to $6.96 billion.

As for the modest net interest margin pressure Watt referred to, the ASX 200 bank's NIM decreased by 0.03% to 1.71% for the full year.

According to NAB, "This primarily reflects home lending competition, higher term deposit costs and deposit mix impacts…"

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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