National Australia Bank Ltd (ASX: NAB) is the only "big bank" to have underperformed the S&P/ASX 200 (ASX: XJO) (^AXJO) over the past 10 years. However if you're considering holding your breath and waiting for its fortunes to turnaround, you should think twice before doing so.
In the past 10 years while our biggest banks – including Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA) – have been growing their market share of mortgages and household credit, NAB has been struggling to pay down bad loans in the UK and hasn't managed to string together any other meaningful growth in local markets.
Australia and New Zealand Banking Group (ASX: ANZ) continues to outperform NAB in almost every aspect, including portfolio growth and profitability. It is also rapidly expanding its footprint throughout Asia as part of its Super Regional Strategy which it started in 2007. Asia is something which NAB and Westpac have only recently begun to focus on.
But NAB continues to control a big portion of Australia's and New Zealand's business banking. It also controls around 19.6% of retail superannuation. According to APRA, in the most recent half year, NAB controlled 22.8% of Australia's business lending. Over in New Zealand that figure is as high as 26.8%.
However while these figures are impressive (to say the least), in the domestic market NAB's business bank continues to lose some of its market share to competitors. For example, in the first half of 2013 NAB controlled 24.6% of business lending.
In addition, the bank's renewed focus on mortgages and the "break up" with other banks may have increased market share of mortgages but came at the expense of profitability. For example, in the 2014 interim report, NAB's Australian division produced a Net Interest Margin (NIM) of just 1.63%! By comparison ANZ's figure stood at 2.48%.
A better bet than NAB
I've previously said that until NAB can pay-down its UK operations or the shares significantly drop in price it is not a 'buy'. I suggest investors adopt a wait-and-see approach. Call me fussy. Call me picky. But in the world of investing there's two things I know for sure:
1. Patience doesn't lose us money, and;
