National Australia Bank Ltd (ASX: NAB) shares have been steadily rising over the last few months. In the last three months, NAB shares have gone up by almost 10%.
With shareholders seemingly feeling more confident about the ASX bank share, let's look at what investors may want to pay attention to in the shorter and longer term.
Things to consider right now
The bank is due to reveal its full-year result on 9 November 2023, so we won't get to hear about its financials in October. But, I'd imagine during October some investors may be putting more thought into what the bank may report as the result gets closer.
According to Commsec, NAB is projected to generate earnings per share (EPS) of $2.48 in FY23, which would put the NAB share price at under 12 times FY23's estimated earnings.
Interestingly, competition in the banking sector is reducing after being intense in the first few months of 2023. This could be helpful for supporting the net interest margin (NIM) and the NAB share price.
One of the other things that is supporting the NAB share price is its ongoing buyback of up to $1.5 billion, returning capital to shareholders to manage its common equity tier 1 (CET1) ratio towards its target range of between 11% to 11.5%. Share buybacks mean the value of the business is being shared among fewer shares, theoretically increasing the underlying value of each NAB share.
It can also increase shareholder statistics like the return on equity (ROE).
The NAB FY23 dividend per share is expected to be $1.67 according to Commsec, which suggests that the final dividend per share could be 84 cents. This implies the FY23 grossed-up dividend yield could be 8.2% and the grossed-up dividend yield of the FY23 final dividend could be 4.1%.
NAB's earnings are expected to be lower in FY24 and FY25 than FY23, according to Commsec projections.
If we assume NAB hits those projections, it's priced at 13 times FY24's estimated earnings.
When the bank announced its FY23 third quarter, the NAB CEO Ross McEwan said:
We know this environment is challenging for our customers, but pleasingly, most are proving resilient with only a modest deterioration in asset quality in the 2023 third quarter. Consistent with our strategy, we are focused on keeping our customers and our bank safe and maintaining prudent risk and balance sheet settings. Capital levels remain healthy even after allowing for our latest on-market share buyback announced today. Liquidity and collective provision coverage are strong and we raised $37 billion of term funding by end July.
We will continue to execute our long-term strategy with discipline and improve customer and colleague outcomes to deliver sustainable growth and improved shareholder returns.
The level of competition could be vital for deciding how strong margins will be in the future.
Do analysts rate NAB shares as a buy?
There are currently six buy ratings on the ASX bank share, with four hold ratings and four sell ratings.
The most common rating for NAB is a buy, but its recent strength means it's not as good value as it used to be.
While the shorter-term looks uncertain, particularly with arrears and provisions for bad debts, I still believe that NAB is one of the best banks on the ASX. I like the management team, and it would be my pick of the domestic banks. However, there are other ASX dividend shares that could make even better picks with more growth potential, in my opinion.