The National Australia Bank Ltd. (ASX: NAB) share price has moved sideways since early March, up just 3%. However, this could change following the banking giant’s recent announcement that it will conduct a buyback of its shares.
On Friday’s closing bell, NAB shares finished the day up 0.62% to $25.93.
Could NAB shares be a buy?
Over the coming months, NAB will undertake a buyback of up to $2.5 billion of its ordinary shares on-market. Expected to commence mid to late August 2021, the bank will reduce its surplus capital whilst increase shareholder value.
Basically, this means that when NAB buys back its shares, the number of shares on its registry will decrease. With a lesser amount, this effectively increases the value of each share as the revenue and profits remain the same.
Traditionally when this occurs, a company’s share price tends to rise over time.
In addition to the buyback, NAB announced that it has engaged with Citigroup Inc about the potential acquisition of its Australian consumer business. NAB noted that it regularly assesses opportunities to take over businesses that support its growth strategy in core banking markets.
What do the brokers think?
In mid-June, Australian investment house Morgans cut its rating on NAB shares by 5.2% to $27.50.
Following suit last week, Bell Potter raised its outlook by 12% on the bank’s shares. The Australian investment advisory firm put a 12-month price target of $27.50. This implies an upside of around 6% at the current NAB share price.
NAB share price snapshot
Both NAB shares and the S&P/ASX 200 Index (ASX: XJO) have tracked similarly year to date, up 14% and 12%, respectively. However, when looking at the past 12 months, the NAB share price has recorded a 43% return, while the ASX 200 is sitting 22% in the green.
Based on valuation grounds, NAB has a market capitalisation of roughly $85.5 billion, making it the fifth largest company on the ASX.