National Australia Bank Ltd (ASX: NAB) shares are having a good session on Friday.
At the time of writing, the banking giant's shares are up 2.5% to $44.11.
Does this make them expensive or are they good value? Let's see what Macquarie Group Ltd (ASX: MQG) is saying about the bank.
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What is Macquarie saying about NAB shares?
Macquarie was relatively pleased with NAB's performance during FY 2025 but concedes that the big four bank fell short of high expectations.
In light of this, it feels that NAB's shares are looking a touch expensive. It said:
NAB delivered an in-line result but it fell short of high expectations following strong 3Q25 trends and unlike WBC, missed the "icing" of a BDD beat and capital surprise. This leaves the share price, which is already elevated, without fresh catalysts for further re-rating.
On the flip side, while the market appears to be increasingly concerned about dividend sustainability (which has been our long-held concerns – see Closer to the bottom of the barrel), we don't see NAB's dividend under imminent threat in FY26. Furthermore, NAB appears to be making progress on key priorities, with stronger deposit growth and stabilised proprietary mortgages.
Positively, with the broker now expecting fewer rate cuts from the Reserve Bank of Australia (RBA), it has lifted its net interest margin (NIM) assumptions for next year. It adds:
While reported NIM was 5bps above consensus (2bps ahead of MRE) this was largely underpinned by liquids (+2bps), and offset by weaker noninterest income. Looking forward, we raise FY26 margins 3bps to 1.73% as we incorporate fewer RBA cuts and a better starting point (partly offset by a lower AIEA).
Neutral rating
According to the note, the broker has retained its neutral rating on NAB's shares with an improved price target of $39.00 (from $38.00).
Based on its current share price of $44.11, this implies potential downside of 11.5% over the next 12 months. Though, this is reduced to around 8% if you include dividends.
Commenting on its recommendation, Macquarie said:
NAB's operational trends appear sound, but the risk of intensifying business competition is likely to weigh on sentiment. NAB is trading at ~18x P/E, ~11% above ANZ and 8% below WBC. However, given the FY25 result lacked clear catalysts for further re-rating we maintain our Neutral rating.
Valuation: We increase our TP to $39/share (from $38/share), broadly in line with earnings changes. This is based on our relative valuation and Gordon Growth valuation.
