Is the National Australia Bank Ltd (ASX: NAB) share price a buy?
Over the past month the NAB share price has dropped by 10%, so does that mean that it's 10% better value?
During that that time the bank has released its full year result which didn't hugely impress.
NAB's cash earnings fell 10.6% to $5.1 billion and statutory profit dropped by 13.6% to $4.8 billion. However, there was one part of the result which was decent – cash earnings excluding large notable items rose 0.8%, but that excludes $1.1 billion of customer remediation and a $348 million capitalised software policy change.
The profit rise suggests that NAB's 'underlying' profit improved slightly during FY19 and suggests things may be getting better for the bank. However, some of the metrics didn't actually go in the right direction.
The net interest margin (NIM) worsened by 0.07% to 1.78%, credit impairment charges increased by 18% to $919 million and the ratio of loans 90+ days past due and grossed impaired assets to gross loans and acceptances increased 0.22% to 0.93% mostly because of rising Australian mortgage delinquencies.
For a lot of shareholders the most painful part of the report may have been the 16% cut of the total FY19 dividend to $1.66. The yield is still high, just not as high as it was.
Last week the bank announced it had settled a class action brought against NAB in relation to consumer credit which caused another $49.5 million to go up in smoke.
But in the release of its full annual report, the bank warned that it may be involved in a breach or alleged breach of laws governing bribery, corruption and financial crime.
NAB said it has reported a number of serious breaches of anti-money-laundering and counter-terrorism financing laws (AML/CTF). Commonwealth Bank of Australia (ASX: CBA) has already received a $700 million fine for not reporting to AUSTRAC correctly and look at all the trouble facing Westpac Banking Corp (ASX: WBC).
Foolish takeaway
NAB is trading at 12x FY21's estimated earnings with a grossed-up dividend yield of 9%. There's a lot of uncertainty for NAB in the short-term in the long-term, I wouldn't want to buy shares because of what may happen over the next 12 months.
