The National Australia Bank Ltd. (ASX: NAB) share price has had a pretty awful year. Down almost 25% from its 2018 high at the time of writing, NAB hit its lowest level in six years this December and is currently trading with a forward P/E ratio of 10.4.
Like its 'Big Four' stablemates Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ), the NAB share price has been hammered as revelations of misconduct and scandal have flowed relentlessly from the Royal Commission.
Additionally, the Australian property market's recent but rapid cooling has squeezed one of NAB's most profitable revenue streams: mortgage lending. These conditions have pushed frustrated investors too far and they have deserted the banks in droves.
For value investors and yield-hunters however, has this presented an opportunity? Banking in Australia is a highly profitable oligopoly. As one of the 'Big Four' banks, NAB enjoys several competitive advantages: extensive pricing power, low-cost operations, and a powerful brand to name a few.
Additionally, NAB has a substantial market share in the business banking sector, with 45% of its earnings flowing from business lending operations. This gives NAB a unique position to benefit from a recovery in demand for business credit.
In response to the Royal Commission, NAB announced a $314 million customer remediation package earlier this year. While this was a hit to the company's bottom line, it represents a one-off cost and the bank's finances remain very strong. Exposure to risky debt that plagued the bank during the 2008 financial crisis is no longer a threat to NAB's fundamental stability and high-quality assets, stable interest margins and solid loan growth gives NAB both a strong buffer against any future economic headwinds and a promising outlook going forward.
As any income-investor would know, interest rates have been stuck at historical lows for many years. At current prices, NAB is paying a fully-franked dividend yield of 11.8% going into 2019, which is one of the most attractive yields on the ASX.
Foolish Takeaway
Providing over four times what you could expect to get for a term-deposit, I believe the NAB share price is looking extremely attractive both from a value and yield perspective and would be a strong foundation for any income-based portfolio. I wouldn't expect the share price to rocket anytime soon, but I believe that NAB's sound capital, modest credit growth, and high profitability indicate a sustainable dividend yield into the future.
