The National Australia Bank Ltd (ASX: NAB) share price is down 16% over the last month. This big four ASX bank has suffered a decline like a lot of fellow S&P/ASX 200 Index (ASX: XJO) shares.
However, one fund manager thinks big four ASX banks are good opportunities after the recent decline. Will Riggall, the chief investment officer from Clime Investment Management, thinks the sell-off in ASX bank shares after the June interest rate increase may have been overdone.
What's attractive about the NAB share price?
Riggall explained that the big four ASX banks have been hurt due to increased concern that "higher interest rates will see a sharp property downturn".
"We believe house prices are set to decline," he said. "However, given the amount of savings held by consumers, we are unlikely to see the sharp increase in defaults that would be needed to offset the positive impact that higher variable rates have on bank earnings."
With that in mind, the fund manager is "selectively" increasing its position in bank shares in this period of volatility.
In fact, it's the dividends from the banks which are seen as a "key attraction". Clime sees the dividends as having a "high and sustainable" dividend outlook.
The fund manager is expecting this period to likely be a lower-return period.
The fall in the NAB share price has also pushed up the prospective dividend yield.
Clime currently prefers to own ASX shares that have exposure to corporate and government spending, with the Australian consumer "likely to remain under pressure".
On NAB, the fund manager said it had been a "stellar performer" for the portfolio this year, mostly driven by the "exceptional' turnaround under the new CEO Ross McEwan.
How is the bank performing?
The last the market heard from the big bank was the release of its FY22 half-year result on May 5. It said it generated $3.55 billion of statutory net profit after tax (NPAT) and $3.48 billion of cash earnings, representing a 4.1% increase year on year.
Revenue rose 4.6%, benefiting from "pricing discipline and strong growth in lending and deposits which were up 10% and 12% respectively versus March 2021".
It made a cash return on equity (ROE) of 11.3% in that result. Looking at its balance sheet, the big bank said its group common equity tier 1 (CET1) ratio was 12.48% at the end of the period.
The NAB share price fell 0.5% the day the results were released and 1.9% the following day.
NAB dividend
As the fund manager said, the bank dividends can form a sizeable part of the total returns. In HY22, NAB decided to declare an interim dividend of 73 cents per share, which was a double-digit increase compared to the FY21 interim dividend.
Looking at the last 12 months of dividends from NAB, it has a grossed-up dividend yield of 7.6% at the current NAB share price.
