The National Australia Bank Ltd (ASX: NAB) share price closed 3.04% higher at $42.43 a piece on Thursday afternoon.
It means the shares are now 0.07% higher for the year-to-date and 8.07% higher than this time last year.
ASX bank stocks are in the spotlight right now thanks to a shift in direction for interest rate projections, cost-of-living fears, mortgage competition and valuation concerns after strong rallies last year.
Late last year, Reserve Bank Governor Michelle Bullock said that she didn't see a rate cut "on the horizon for the foreseeable future" and signalled that the board might consider an extended hold period or even a rate hike in 2026.
The announcement followed news that inflation continues to persist above desired levels.
NAB currently predicts that the Reserve Bank will increase the cash rate by 25 basis points in February and again in May. It's a u-turn from late last year when 2026 was widely expected to be a year of cash rate cuts.
The inflation figures also show that cost-of-living pressures continue to put stress on household finances and disposable income.
Meanwhile there are concerns that Aussie banks are now wildly overvalued following some incredibly strong price increases throughout 2025.
And NAB was caught up in all of these headwinds.
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What's ahead for NAB's share price in 2026?
In 2026, NAB plans to continue focusing on expanding its business banking and lending division and simplify its core business. The major bank is also making a strategic push on its technology.
Analysts forecast moderate earnings and revenue growth for NAB over the next few years. But when it comes to the NAB share price, analysts are far less bullish. TradingView data shows that 6 out of 16 analysts have a sell or strong sell rating on NAB shares. Another 6 have a hold rating while 4 have a strong buy rating. Sentiment is incredibly mixed.
The average target price over the next 12 months is $38.91 a piece. This implies an 8.3% downside from levels at the time of writing. Although expectations do vary wildly. The minimum is $28.79, which implies a potential 32.15% drop. But the maximum is $47 per share, which suggests a potential 10.77% upside at the time of writing.
But not all is lost for the shares
Despite some not-so-positive expectations for the NAB share price this year, the stock is still a good buy for passive income.
Major banks, like NAB, are core income stocks on the ASX. The stock offers fully-franked dividends which appeal to investors looking for a reliable passive income. But, dividend payouts aren't guaranteed.
In FY25, NAB paid an annual dividend per share of $1.70, which was 1 cent per share higher than in FY24. At the time of writing, that translates into a trailing grossed-up dividend yield of around 4%, including franking credits.
In FY26, some projections suggest the annual dividend will remain around the same level of $1.70 per NAB share.
