National Australia Bank Ltd (ASX: NAB) shares have pulled back meaningfully from their highs.
The bank's shares are trading around $37.15 at the time of writing, well short of their 52-week high of $49.45.
That recent weakness is not hard to understand. The economic outlook is uncertain following several interest rate hikes and the property market is cooling in response to the Federal Budget.
But at today's price, I think NAB shares are starting to look attractive for investors considering putting $5,000 to work.
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The valuation looks reasonable
The first thing that stands out is the valuation. According to CommSec, NAB is expected to generate earnings per share of $2.43 in FY26 and $2.62 in FY27.
Based on the current share price, that puts the bank on roughly 15 times FY26 earnings and about 14 times FY27 earnings.
That does not look stretched to me for one of Australia's largest banks.
The dividend outlook also looks appealing. CommSec has NAB paying dividends per share of $1.72 in FY26 and $1.78 in FY27. At the current share price, that implies dividend yields of about 4.6% and 4.8%, respectively.
Those dividends are expected to be fully franked, which could make the income even more attractive for some Australian investors.
Of course, yield alone is not enough. A bank still needs sound credit quality, disciplined lending, strong deposits, and enough capital to support the payout. But I think NAB delivers on all these.
A business bank, not just a mortgage stock
The housing market is clearly important for the major banks. If buyer demand weakens, transaction volumes slow, and mortgage growth becomes harder to find, that can weigh on sentiment toward the sector.
But NAB has an important point of difference: business banking. In its recent half-year update, Business and Private Banking generated $1.85 billion of cash earnings excluding large notable items. That was around half of the group's cash earnings on the same basis.
That is a meaningful contribution. It means NAB is not simply dependent on the household mortgage cycle. The bank has large exposure to businesses that need loans, deposits, transaction banking, working capital, merchant services, and advice through changing conditions.
That does not remove risk. If the economy weakens, business customers can also come under pressure. But I think NAB's business banking strength gives it a broader earnings base than investors may appreciate when the market is focused mainly on housing.
Foolish Takeaway
I think NAB shares are worth considering at current levels.
The housing market backdrop is not perfect, and investors should expect some uncertainty to continue. But the share price has already fallen a long way from its 52-week high, and the valuation now looks much more reasonable.
What makes NAB particularly interesting to me is the business banking exposure. If mortgage lending becomes more difficult, that part of the group could help support earnings and give the bank more than one path to growth.
So, would I invest $5,000 into NAB shares? At today's price, I would be comfortable doing so as part of a diversified ASX share strategy.
