The NAB (ASX:NAB) share price is underperforming its big four peers so far today

The NAB share price is underperforming in the big banking sector today.

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The National Australia Bank Ltd (ASX: NAB) share price is currently underperforming compared to the other big four ASX banks. NAB shares are currently up just 0.2%.

That compares to the Commonwealth Bank of Australia (ASX: CBA) share price being up 0.9%, the Westpac Banking Corp (ASX: WBC) share price being up 0.7% and the Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price being up 0.8%.

NAB changes interest rates

According to reporting by a few organisations, including RateCity, NAB has decided to increase some of its fixed rates.

This is apparently the second time that NAB has increased its fixed rates in recent months.

The 3-year rate was reportedly increased by 0.1 percentage point to 2.18%. Next, the four-year rate was hiked by 0.25 percentage points to 2.49% and the 5-year rate was increased by 0.30 percentage points to 2.79%. research director, Sally Tindall, noted:

Governor Lowe has made it clear rates will not rise until at least 2024. As a result, many banks are still hiking rates of three years and over, however, cuts to two-year rates have slowed.

NAB has been careful to keep its two-year fixed rate under 2 per cent. Without this rate the bank could struggle to keep new customers coming in the door in what remains an ultra-competitive market.

These fixed rate hikes won’t impact how much someone can borrow, as banks base serviceability tests on the revert rate. However, they do serve as a reminder these rates aren’t going to stick around forever.

‘Liar loans’ in focus

Loan applications are also in focus this week after it emerged in UBS’ annual survey that there was a record number of so-called liar loans over the last 12 months. The survey showed that 41% of those applications “were not completely factually accurate”.

Time will tell whether this has any bearing on profit or the NAB share price.

The things that people were not truthful about included not disclosing all of their living costs, not giving the bank a full picture of their liabilities and overestimating their income.

Commenting on the higher levels of debt that people were taking on compared to their income, UBS wrote:

Amid home prices booming 18.3 per cent year-on-year (highest since 1989), we think borrowers are ‘chasing the market’ and stretching towards their capacity limit to be able to qualify.

NAB share price valuation snapshot

Over the last 12 months the NAB share price has risen by almost 65%.

At the current NAB market capitalisation and using the estimated on Commsec, the bank is priced at around 15x FY22’s estimated earnings.

The major bank is projected to pay an annual dividend of $1.32 per share in FY22, which would translate to a grossed-up dividend yield of 6.7%.

Broker Credit Suisse currently rates NAB shares as a hold, with a price target of $28.50. Credit Suisse believes that its improved performance is reflected in the current valuation.

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