National Australia Bank Ltd (ASX: NAB) shares have been among a select group of S&P/ASX 200 Index (ASX: XJO) stocks that have benefited from rising interest rates this year.
Prior to the RBA's first rate increase in more than a decade on 4 May, Australia's official cash rate stood at the rock bottom 0.10%.
While the banks obviously charge higher rates for their loans, and offer less on their deposits, the historically low cash rate squeezed their net lending margins. So as rates have climbed, the banks' net interest margins have broadly increased. Which has offered a welcome tailwind for NAB shares.
Yet, while all the ASX 200 banks have benefited from higher rates, Andrew Martin, principal of Alphinity Investment Management, told The Motley Fool he prefers NAB shares over the other big bank stocks. (Stay tuned for the full interview, next week.)
Why NAB rather than some of the other ASX 200 bank shares?
Martin said, "The banks are one of the few sectors that are getting [earnings] upgrades. Banks are beneficiaries of higher rates. That's still playing through."
He added that NAB had done "particularly well, in a relative sense" in the current environment.
So, why NAB rather than one of the other ASX 200 bank shares?
According to Martin:
I think NAB is executing better. They have really reinvented themselves over the last five years.
They've reclaimed their title as the best business bank in the country. Business is actually going really well, despite everything else that's going on. They've managed to have a better margin outcome than their peers. And they've managed their costs better. So their growth trajectory looks better than some of the others.
At the current price, NAB shares pay a trailing dividend yield of 5.0%, fully franked.
How has NAB been performing?
Despite underperforming some analyst expectations, NAB reported strong FY 2022 results last week.
Among the highlight, cash earnings increased 8.3% from the prior year to $7.1 billion. Statutory net profit was also up 8.3% from FY 2021 to $6.9 billion. And the bank reported an exit net interest margin of 1.72%.
Year to date, NAB shares have gained around 4% while the ASX 200 has lost 6%.
