National Australia Bank Ltd (ASX: NAB) shares have struggled in 2026.
Shares in the S&P/ASX 200 Index (ASX: XJO) bank stock were recently trading for $37.81. That sees shares in the big four Aussie banks down 10.8% year to date, materially underperforming the benchmark index's 0.5% gains over the same period.
Though we shouldn't dismiss the 85 cents per share fully franked dividend NAB declared when it released its half-year results on 4 May. While stockholders won't receive that passive income payout until 2 July, NAB stock traded ex-dividend on 7 May.
NAB shares trade on a 4.5% fully franked trailing dividend yield.
But with storm clouds potentially building for Australia's banking sector, Fairmont Equities' Michael Gable believes that it would do well to ignore that passive income potential and look for better investment opportunities elsewhere (courtesy of The Bull).
Here's why.
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Time to sell NAB shares?
According to Gable:
Trading conditions are getting tougher for retail banks as rising interest rates, sticky inflation and weakness in the property sector are likely to negatively impact lending activity and credit quality.
And Gable cautioned that NAB's focus on business lending won't shelter it from these headwinds.
"In a weaker economy, NAB is particularly vulnerable to softer earnings growth due to its higher focus on business banking.," he said.
Summarising his sell recommendation on NAB shares, Gable concluded, "Despite a significant share price fall, NAB valuations aren't cheap, leaving the stock exposed to downside risk."
What's been happening with the ASX 200 bank stock?
With a look in the rearview, NAB reported relatively strong half year results (H1 FY 2026) on 4 May.
Highlights included a 2.3% year-on-year increase in cash earnings (excluding notable items) to $3.59 billion. And NAB's underlying profit was up 6.4% over the six months.
Still, NAB shares closed down 1.6% on the day of the results release as management flagged an uncertain second half outlook, alongside a $300 million increase in the bank's collective provisions.
The bank stated, "While underlying asset quality outcomes have generally improved in 1H26, the outlook is more uncertain as a result of the Middle East conflict which presents a key source of downside risk."
And NAB CEO Andrew Irvine elaborated:
Geopolitical tensions have created a more volatile macro-economic environment. We enter this period in good shape and actions taken in 1H26 to bolster our balance sheet will allow us to continue to grow and support customers.
Forward looking collective provisions (CP) have increased by $300 million and the ratio of CP to credit risk-weighted assets sits at 1.35%.
