National Australia Bank Ltd (ASX:NAB) holds interest rates

National Australia Bank Ltd (ASX:NAB) has taken the interesting move of holding rates.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

National Australia Bank Ltd (ASX: NAB) has taken the interesting move of not increasing its interest rate whilst its peers of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) all decided to.

NAB decided to hold its standard variable rate for home loans at 5.24%. It decided to stay put with the interest rate to rebuild the trust of customers. This decision is on the back of ASIC deciding to sue NAB for the fees for no service scandal.

The bank's net interest margin (NIM) has been hurt in recent months with wholesale interest rates rising in the US. Smaller banks have been raising rates to combat the increasing costs and most of the big banks have decided to increase too.

However, NAB CEO Andrew Thorburn did say that NAB will continue to regularly review its rates and assess whether current market conditions. He said "By focusing more on our customers, we build trust and advocacy, and this creates a more sustainable business."

According to NAB, a customer with a $500,000 home loan would have paid an extra $47 each month, or $564 per year, on their repayments based on an owner occupier, principal and interest loan over a 30-year term.

This seems like an honourable move by NAB. The big banks make billions of profit each year, it isn't a very competitive environment if when their costs go up they can all increase their rates with no detrimental effect because customers don't have a choice, or there are large moving costs.

However, if I were a NAB shareholder I'd be a little annoyed it didn't follow its peers, even if the increase was smaller than the other bank increases.

Foolish takeaway

NAB is currently trading at under 12x FY19's estimated earnings with a grossed-up dividend yield of 10.2%. Whilst it is better value than before the Royal Commission I will personally be avoiding the big banks unless there is 'blood on the streets'. I think there are better growth options out there.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

A corporate female wearing glasses looks intently at a virtual reality screen with shapes and lights representing Block shares going up today
Bank Shares

Are Westpac shares a buy following the bank's big tech update?

Is now a good time to buy the banking giant's shares? Let's find out.

Read more »

Different Australian dollar notes in the palm of two hands, symbolising dividends.
Bank Shares

Own CBA shares? It's payday for you!

A dividend is heading to CBA shareholders’ bank accounts.

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Bank Shares

Are CBA shares really worth $120?

It has been a good year for ASX bank shareholders.

Read more »

a group of people sit around a computer in an office environment.
Bank Shares

Westpac shares push higher on $9.8b technology simplification plan

Westpac plans to spend big on technology to close the gap on its rivals.

Read more »

A worried woman looks at her phone and laptop, seeking ways to tighten her belt against inflation.
Economy

NAB boss issues dire prediction for Aussie economy

NAB’s CEO has issued a stark warning on the outlook for Australia’s economic growth.

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Bank Shares

Own CBA shares? Here's the tech stock the banking giant just invested in

CBA has made an interesting investment. Here's what you need to know.

Read more »

A woman gives two fist pumps with a big smile as she learns of her windfall, sitting at her desk.
Bank Shares

ANZ shares charge higher on $57.5 million class action settlement news

ANZ shares have continued their positive run on Monday.

Read more »

Two people comparing and analysing material.
Bank Shares

Better buy: CBA or Westpac stock?

Which ASX bank share is a better buy?

Read more »