The National Australia Bank Ltd (ASX: NAB) share price is essentially the same as it was a year ago and in 2025 to date, as the chart below shows.
While there has been volatility, it's worth asking if there are any positives or negatives about buying NAB shares.
The bank is operating at an interesting time, considering the RBA cash rate is coming down, which could be both positive and negative.
Significant macroeconomic events are also happening worldwide, which could impact the growth or inflation outlook, particularly the unpredictable US tariff situation.
I don't have a crystal ball, but there are a few factors I'm keeping in mind. Let's start with the positives.
Positives about NAB shares
One of the most attractive attributes to a lot of Aussies about NAB is the dividend yield. While some investors may be focused on the dividend yield for cash payments, we should keep in mind that the cash payments can make up a significant portion of the total return.
According to the forecast on Commsec, in FY26, NAB could pay an annual dividend of $1.74 per share. This translates into a fully franked dividend yield of 4.6% or a grossed-up dividend yield of 6.6%, including franking credits.
The RBA cutting the cash rate could help the bank in two or three ways. It could reduce the risk of borrowers defaulting, increase total demand for loans, and increase the price-earnings (P/E) ratio investors may be willing to buy NAB shares at because assets are theoretically more attractive in a lower interest rate environment.
The final attractive point I'll highlight is that its valuation is materially lower than Commonwealth Bank of Australia (ASX: CBA). According to Commsec estimates, the NAB share price is valued at 15x FY26's estimated earnings and the CBA share price is valued at 26x FY26's estimated earnings. NAB shares are significantly cheaper than CBA.
Negatives
The bank faces a few negatives for the foreseeable future.
Firstly, RBA cash rate cuts aren't all positive for banks. A lower interest rate should mean NAB's low/zero interest rate accounts (such as transaction accounts) aren't able to generate as much profit for NAB when it lends out that money for a mortgage. This could impact the bank's overall net interest margin (NIM).
If the NIM drops, that is likely to hurt the bank's profitability.
Another negative to consider is the increasing competition in the business banking sector, because that's the key profit generator for NAB. CBA is particularly focused on growing its market share in this sector.
In the NAB half-year result, the bank said its business and private banking division made $1.6 billion of cash earnings, personal banking made $576 million of cash earnings, $909 million for corporate and institutional banking, and $781 million from New Zealand.
Competition for its business earnings could be a significant headwind for the business.
This doesn't seem like an opportune time to invest in NAB shares because the share price is materially higher than it has been for most of the last five years, and it's not as though earnings are likely to soar in the near term.
If I were looking to buy an ASX dividend share for passive income, NAB wouldn't be near the top of my list.
