Not long in the top job, National Australia Bank Ltd (ASX: NAB) CEO Andrew Thorburn has made sweeping changes to our country's largest bank by assets.
Since August 2014 NAB under Thorburn has made a number of senior management changes, partially sold its US bank to the public, taken huge write offs and sold a meaningful stake of its bad loan portfolio.
Today, rumours are circulating NAB is planning to divest part or all of its insurance business, valued at $1.4 billion.
What does the market think?
While all this has been happening the bank's share price has fallen 8%.
Indeed, the market didn't take well to news that earnings per share fell 11% to $2.16 for the 2014 financial year. Although long-suffering shareholders were rewarded with a full-year dividend of $1.98.
However tough calls, like those above, must be made if NAB is to become a worthwhile investment.
Looking back over the past 10 years, NAB's shares have appreciated just 15.6%, versus the S&P/ASX 200's (INDEX^: AXJO) (ASX: XJO) return of 38%. Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA) are up 78% and 151%, respectively.
Indeed, NAB has the worst return on equity (12%), net interest margin (1.93%) and efficiency ratio (53%).
Management teams have come and gone trying to remedy these issues. But the fact is its troublesome UK assets linger and have perniciously hindered overall group profitability over the past decade.
But there are a few good signs.
The size of the bank's 'run off' portfolio – which includes bad UK commercial property loans – is falling and a rationalisation of all foreign assets is underway.
After a successful float of its US bank, Great Western Bancorp Inc (NYSE: GWB), it is likely management will have a similar strategy on the drawing board for its two UK banks, Clydesdale and Yorkshire.
Buy, Hold, or Sell?
I'm delighted to see Mr Thorburn making the tough decisions early on. However, I also know many CEOs have tackled the same problems and been largely unsuccessful. Despite the uncertainty there will come a time (or shall I say price) to buy NAB shares. Unfortunately, when I couple the heightened uncertainty surrounding the bank's foreign assets and a share price which doesn't scream bargain (it's far from it), I believe it's not a worthwhile addition to investors' portfolios.
