The National Australia Bank Ltd (ASX: NAB) share price has returned from its trading halt and is tumbling lower.
At one stage the banking giant's shares were down almost 5% to $15.00. They have since recovered a touch and are now down 2.5% to $15.38.
Why is the NAB share price tumbling lower?
Investors have been selling the bank's shares after it released its half year results and launched a $3.5 billion capital raising on Monday.
In respect to the latter, this morning the company announced the successful completion of the institutional placement component of the capital raising.
NAB will issue approximately 212 million new fully paid ordinary shares to institutional investors at a price of $14.15 per new share to raise $3 billion.
According to the release, NAB received significant interest in the placement from both domestic and offshore institutional investors.
The bank will now push ahead with its share purchase plan which aims to raise a further $500 million.
Should you invest?
While my preference remains Commonwealth Bank of Australia (ASX: CBA), I believe NAB's shares offer a lot of value for money at the current level.
Especially with its balance sheet in such a strong position following the capital raising. I believe this gives it sufficient liquidity to deal with the consequences of the coronavirus pandemic.
And combined with its cost cutting opportunities, a return to growth could be on the horizon once the crisis passes.
I'm not alone in believing that NAB is in the buy zone. This morning analysts at Goldman Sachs retained their conviction buy rating and trimmed the price target on its shares to $17.50.
The broker notes that it delivered a result that was broadly in line with its expectations. It also felt the "result showed that NAB's ability to manage the trade-off between margins and volumes has improved considerably in recent years." It believes this bodes well for the future and I would have to agree.
In addition to this, Goldman appears confident this latest dividend cut is temporary.
It estimates that NAB will pay dividends of 105 cents and 134 cents per share in FY 2021 and FY 2022, respectively. This equates to fully franked yields of 6.8% and 8.7% for the two years. I think this is very attractive given the outlook for interest rates in Australia.
