The Motley Fool

Why the NAB share price is the worst performer on the ASX 200 today

The National Australia Bank Ltd (ASX: NAB) share price has started the week on a disappointing note.

In fact, in afternoon trade the banking giant’s shares are the worst performers on the ASX 200. NAB’s shares are down 3.4% to $27.45 at the time of writing.

Why is the NAB share price dropping lower today?

The catalyst for this decline has been the release of the Westpac Banking Corp (ASX: WBC) full year result.

This morning NAB’s rival reported a 16% decline in statutory net profit to $6,784 million and a 15% decline in cash earnings to $6,849 million.

Whilst this was disappointing, the bank’s decision to cut its dividend materially and launch a capital raising is what appears to have spooked investors most.

Westpac has slashed its final dividend by 15% to 80 cents per share and revealed a whopping $2.5 billion capital raising.

It is undertaking this capital raising in order to strengthen its balance sheet and CET1 capital ratio. The latter is expected to increase to ~11.3% (from 10.7%) following the capital raising, putting it comfortably ahead of APRA’s unquestionably strong benchmark of 10.5%.

The bank also believes it will give it the flexibility to respond to changes in capital rules and for potential litigation or regulatory action.

Why does this matter to NAB?

This matters to NAB because at the end of the third quarter it had a CET1 ratio of just 10.4%. Or 10.65% if you factor in $1 billion (25bps of CET1) of dividend reinvestment plan underwrite proceeds.

Given how Westpac elected to raise funds when it finished the financial year with a CET1 of 10.7%, it looks as though investors believe NAB will have to follow its lead this week.

NAB is due to release its full year results on Thursday morning. No doubt the market will be watching that one even more closely than normal.

Not keen on the banks at the moment? Then check out these highly rated dividend shares with growing fully franked dividends.

Top 3 Dividend Shares To Buy For 2020

When Edward Vesely -- our resident dividend expert -- has a stock tip, it can pay to listen. With huge winners like Dicker Data (up 147%) and Collins Food (up 105%) under his belt, Edward is building an enviable following amongst investors that are planning for retirement.

In a brand new report, Edward has just revealed what he believes are the 3 best dividend stocks for income-hungry investors to buy now. All 3 stocks are paying growing fully franked dividends giving you the opportunity to combine capital appreciation with attractive dividend yields.

Best of all, Edward’s “Top 3 Dividend Shares To Buy For 2020” report is totally free to all Motley Fool readers.

Click here now to access this free report.

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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.

FREE REPORT: Five Cheap and Good Stocks to Buy now…

Our Motley Fool experts have FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.7% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.