The National Australia Bank Ltd. (ASX: NAB) share price slumped 32% lower in FY20, but is the ASX bank share a strong buy this year?
Why did the NAB share price slump lower in FY20?
It’s been a tough 12 months for all the ASX bank shares. While the S&P/ASX 200 Index (ASX: XJO) fell 11.3%, the NAB share price fell even further.
The coronavirus pandemic has spooked investors and hit some bank shares harder than others in 2020. In fact, NAB’s value has slumped 24.5% lower this calendar year while Commonwealth Bank of Australia (ASX: CBA) shares are down just 12.5%.
CommBank shares have been surging in value in recent weeks with the bank selling its 55% stake in Colonial First State for $1.7 billion in May.
But NAB is far from alone as Westpac Banking Corp (ASX: WBC) shares remain down 34.5% in the last 12 months.
There are still some looming questions about the housing market and economy in general. These factors are weighing on investors’ minds and the NAB share price as we enter FY21.
NAB also slashed its dividend in April, announcing a 30 cents per share interim, fully franked dividend. Many investors were disappointed by the cut, down 64% from 1H 2019 distributions, combined with a $3.5 billion equity raise.
But as we enter a new financial year, will we see strong prospects for the NAB share price and the bank’s investors?
Can NAB surge in value this year?
I personally think the market is at an interesting point right now. I’m keen to see what the impact will be on the ASX when the government starts rolling back stimulus measures from September.
If the economy bounces back sooner than expected, the NAB share price could finish the year strongly. A robust housing market and lower than anticipated unemployment would be good news for ASX bank shares.
However, that is far from a certainty at this point in time. NAB’s next earnings result is due in November but I wouldn’t be holding out for a big dividend given the current conditions.
Having said that, long term, I still see the NAB share price as a strong buy for dividends.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.
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