National Australia Bank Ltd (ASX: NAB) shares delivered strong returns in 2024, outperforming the market with a return of 26%, including dividends.

And the bank wasn't alone either. The S&P/ASX 200 Banks Index (ASX: XBK) is up more than 30% in the past year, marking one of the best-performing periods for ASX banks.

Despite this, views are mixed on the banking sector, and the views on NAB shares are no different. Let's see the latest for the banking stock.

Why brokers are divided on NAB shares

NAB shares have started the new year well and are up more than 5% in the past week of trade. These gains come as bank stocks trade at some of their highest valuations in years.

Still, analysts at investment bank Macquarie have upgraded their rating on NAB shares to a hold from a sell this week.

While this isn't an upgrade to 'buy', it is still a worthy talking point given the muddied outlook for Aussie banks this coming year.

Analyst Victor German highlighted Macquarie's mixed outlook for bank stocks this year but noted the "appeal" of NAB shares due to their "relative valuation", according to The Australian.

"Bank investors continue to grapple with a challenging predicament," German said, noting the current dilemma of high valuations but strong fundamentals.

…Banks are trading at their highest levels in absolute and relative terms, making them some of the most expensive stocks on the market.

However, the catalyst for near-term underperformance isn't clear, as we see upside risk to near-term earnings underpinned by the resilient economic conditions and better-than-expected funding conditions.

In its December fund letter, Firetrail Investments held a similar view on ASX banks. It says bank profit growth "was quite anaemic as we expected" and that it "selectively increased exposure" to NAB last year.

Why won't Macquarie or Firetrail rate NAB shares a buy, then?

Macquarie also mentioned the "anaemic" growth outlook for the sector, meaning it "struggles" to be bullish "at current levels…".

Whereas Firetrail expects banks to "underperform the market in 2025" due to changes in valuation versus growth.

Meanwhile, Bell Potter recommended selling NAB shares in late December. According to The Bull, Analyst Christopher Watt explained that the "upside appeal appears limited" for NAB shares. "Selling protects against potential downside," he added.

Finally, the consensus of analyst estimates recommends that NAB stock is a hold, according to CommSec.

This is made up of three buys, five holds and six sell ratings on the stock, whereas the consensus price target is $33.86 apiece, according to Tradingview data.

Foolish takeout

NAB shares outperformed the broader market last year, but experts aren't so sure on the bank's outlook for 2025.

The general view is neutral, underscored by the mixed view on the ASX banking sector this year. This is due to softer earnings growth and expensive valuations.

For the time being, NAB has climbed 7% in the past month of trade.