National Australia Bank Ltd (ASX: NAB) shares are wobbling today.
Having swung from small gains to small losses in early trade, shares in the S&P/ASX 200 Index (ASX: XJO) bank stock are currently up 0.2% at $25.25 apiece.
That's today's price action for you.
Now looking further ahead, could NAB shares be wielding a double-edged sword?
What headwinds may lie ahead?
NAB shares have underperformed those of the other big four Aussie banks so far in 2023, down 16% since the closing bell on 30 December.
One of the upsides that have historically helped support NAB is its large exposure to small and medium enterprises (SMEs) loans. SME lending has seen faster growth than the residential mortgage segment in Australia and tends to be very profitable.
But following the bank's half-year earnings report on 4 May, lower than-expected net interest margins (NIM) saw NAB's share price drop 6% on the day.
NAB reported a NIM of 1.77%, a 0.16% increase year on year. However, that was down slightly from the end of the first quarter and below most analysts' expectations. Goldman Sachs, for example, had forecast a NIM of 1.83%.
At the time, UBS analyst John Storey said:
The standout for us was NIM only rising 10 basis points versus the previous half year with NAB calling out peaking NIM in Dec 22 of 1.79%, with a [second quarter] exit NIM of 1.76%.
This result in our view confirms consensus is likely to revise EPS down further.
NAB shares have continued to struggle since the bank released its half-year report, down 12% since 3 May.
But Storey continues to see potential headwinds ahead, and he has a sell rating on NAB shares. Among those headwinds, is slower growth in its mortgage lending than the other big banks are achieving.
According to Storey (courtesy of The Sydney Morning Herald), "They are certainly growing slower than the market, and they are losing market share. At some point in time it could present revenue headwinds."
Other headwinds cited by Storey include increased competition for business lending.
And the potential double-edged sword is NAB's market-leading exposure to SME lending, which Storey said could see the bank saddled with more bad debts amid a slowing Aussie economy.
"We don't think some of these concerns are reflected in the share price," he said.
How have NAB shares been tracking longer-term?
Taking a step back, NAB shares are down 3% over the past five years.
