The National Australia Bank Ltd (ASX: NAB) share price has disappointed investors in 2025, lagging other ASX bank shares.
In the 2025 calendar year so far, NAB shares have dropped 9%.
That compares to a 3.8% fall for Commonwealth Bank of Australia (ASX: CBA) shares, a 3.5% drop for the Westpac Banking Corp (ASX: WBC) share price, and a rise of 3.4% for the ANZ Group Holdings Ltd (ASX: ANZ) share price.
The company hasn't released its half-year or annual result yet. However, there have been two announcements (among other things) that investors have noted.
Disappointing ASX announcements
In February 2025, the company announced its quarterly update for the three months to December 2024. It revealed it made $1.74 billion of cash earnings – a 2% reduction compared to the quarterly average of the cash earnings of the second half of FY24. The NAB share price fell 7% in response.
Management said the decline was due to higher impairment charges, a higher income tax expense and a small decline in the net interest margin (NIM) because of funding costs, lending competition and deposits. The NIM tells investors how much profit a bank is making on its lending, comparing the interest rate on the loans compared to the costs of the funding (such as customer deposits).
The other disappointing update was that the NAB chief financial officer (CFO) has decided to leave the bank and take up the same position at Westpac. What was the main reason for that change? It's not entirely clear. Nor is it a great look for NAB.
What else is going wrong for NAB shares?
The big four ASX bank share is also suffering from increasing competition in its main profit centre of business banking.
UBS is doubtful NAB can reclaim its 25% market share in business banking in the next three years. The broker said:
NAB has a large market share in business banking, with ~23% of business lending. We think competition in this product segment is expected to increase, with majors allocating additional capital to the segment and specialist lenders cementing their position. NAB has responded by investing more and also hiring additional bankers. Business & Private Banking a >40% of NAB group earnings with the encumbent having a large profit share to defend.
On the bank's potential to grow its retail banking market share and the NAB share price valuation, the broker said:
NAB is the smallest of the large banks in retail banking but has been deliberate in its strategy to expand its market share in this segment. The Citi deal from 2021 has been complementary to its existing consumer/card product offering, and ROE and EPS accretive from day one. This, combined with its push into digital banking through UBank and 86 400 could favourably position NAB in higher-margin and faster-growing profit pools within retail but mortgages remains a key challenge.
NAB has been one of the biggest outperformers among the majors over the past few years, with the market rewarding management for signs of delivery on the group's long-term strategy. However, we believe much of the upside has been priced in and NAB now appears fairly valued relative to peers.
Overall, investors don't seem as positive on NAB shares. It has a neutral rating on the ASX bank share with a price target of $37.50, which this implies a possible rise of approximately 10% over the next 12 months from where it is right now.
