National Australia Bank Ltd (ASX: NAB) shares are a popular option for Australian investors.
But popular doesn't always mean good.
So, let's take a look at what analysts at Macquarie Group Ltd (ASX: MQG) are saying about the big four bank.
What is Macquarie's view on NAB?
Macquarie notes that NAB has showcased its investments in its business lending and deposit franchises in a presentation this week.
While there were positives from its investments, such as improved turnaround times, Macquarie believes they will largely just maintain its position in the market rather than increase it. Particularly given how rivals have been making similar investments in their own platforms. The broker explains:
While these investments, including the rollout of the new business lending platform and new deposit products, demonstrate sound progress (in some areas, NAB may have a first-mover advantage), we believe, to a large extent, they are partly business-as-usual (BAU) investments.
NAB's investment in business lending over the last five years marked a major step forward in 1H25 with the launch of its new lending platform, which may have partly contributed to weaker lending growth during the period. This investment has ultimately resulted in a substantial improvement in turnaround times. However, with peers also investing in similar platforms, NAB will need to continue investing to maintain its competitive edge.
Macquarie also points out that NAB highlighted its investments in transaction banking solutions that are aimed at targeting deposit-rich segments. This includes real estate and government. However, it is once again similar to what rivals have been doing. It adds:
Importantly, these investments have been paired with cultural changes to foster a stronger focus on transactional banking relationships. However, again, these investments appear similar to those of peers and likely represent a shifting baseline for customer expectations.
Should you buy NAB shares?
In light of the above, the broker has seen no reason to change its view on NAB and its shares.
As a result, Macquarie has retained its neutral rating and $35.00 price target on the big four bank.
Based on its current share price of $38.55, this implies potential downside of 9.2% for investors over the next 12 months.
Though, with 4.4% dividend yields expected in FY 2025 and FY 2026, the total potential (negative) 12-month return is limited to 4.8%.
Commenting on its neutral recommendation, the broker concludes:
We see the technological update as progress in the right direction. However, with business banking returns coming under pressure from intensifying competition and peers all investing in similar areas, today's update does not fundamentally change our view on NAB. Maintain Neutral.
