The National Australia Bank Ltd. (ASX: NAB) share price has had a golden 2019 so far, rising more than 17% since the start of the year (not including NAB's fully franked 6.55% dividend). Among the ASX banking stocks, NAB has been an outperformer for the year so far. NAB shares are now trading at the highest levels since October 2018 and bullish sentiment has increased dramatically ever since NAB announced the appointment of new CEO Ross McEwan last week.
So is it too late to buy NAB shares? Or is there still some upside with this ASX banking giant?
NAB's year of redemption
Backtrack six months and NAB was deep in the ASX doghouse. The Royal Commission had singled out NAB for special condemnation for the company's attitude and response to the Commission's findings, resulting in the 'departure' of CEO Andrew Thorburn and Chairman Ken Henry. There were serious concerns over NAB's corporate culture and the bank's future direction.
These concerns dissipated rather quickly as acting CEO Phil Chronican took the reigns and began the hunt for a permanent replacement to Thorburn. The appointment this week of Mr McEwan has impressed investors mightily – McEwan has a distinguished career, including turning around the fortunes of the formerly ailing Royal Bank of Scotland over the past 10 years.
What does NAB's future hold?
Being one of the ASX's 'Big Four' banks, NAB enjoys a wide competitive advantage in the Australian financial sector. Strong and recognisable branding, significant pricing power and a huge balance sheet give NAB plenty of firepower.
NAB also enjoys the distinction of being the bank with the largest business banking portfolio. Other ASX banks like Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA) are (in my opinion) overexposed to retail banking (mainly mortgages), leaving them vulnerable to any ructions in our bulging property market. NAB, on the other hand, has a much more diversified earnings base with its "Business & Private Banking" bringing in nearly 49% of its Australian revenue in the 2018 year, compared with "Consumer Banking & Wealth" at 26%.
On these numbers, I am confident NAB will be one of the better performing ASX banks going forward.
Foolish takeaway
I think NAB would be a solid bet if you're looking for ASX banking exposure. I think that the market is now pricing NAB pretty much at fair value, so I don't expect a lot of further price appreciation in the short term. But if the new CEO can pull off some magic, NAB might be a good long-term buy here (and there's always the dividend).
