The National Australia Bank Ltd (ASX: NAB) share price is trading around $38.48 on Monday.
For investors looking at the major banks, NAB offers a combination of earnings, dividends, and exposure to Australian business banking.
At this price, I think the shares deserve a closer look.
Image source: Getty Images
Why I like NAB
One of the main reasons I am positive on NAB is its strong position in business banking.
The bank has deep relationships with Australian small and medium-sized businesses, giving it exposure to lending, deposits, payments, and other financial services.
I like that because it gives NAB another avenue for growth alongside its large consumer banking operations.
Australian banking is still highly competitive, particularly in mortgages, and I would not expect earnings to race higher every year.
But NAB has a sizeable customer base, strong market positions, and a business banking franchise that I think can continue supporting earnings over the long term.
What does the valuation look like?
The next question is whether investors are paying a sensible price.
According to CommSec, consensus estimates are for earnings per share of $2.38 in FY26, increasing to $2.54 in FY27.
At $38.48, that puts NAB on a PE ratio of approximately 16 times forecast FY26 earnings and around 15 times FY27 earnings.
I would not describe that as bargain territory. But I also do not think the valuation is excessive for a major Australian bank with a strong franchise and the prospect of modest earnings growth.
If NAB delivers something close to current expectations, I think today's price leaves room for reasonable capital growth over time.
The dividend remains a big attraction
For many investors, NAB is just as much an income stock as it is a capital growth investment.
That is an important part of the case for me.
CommSec's consensus forecasts point to fully franked dividends of $1.70 per share in FY26 and $1.72 in FY27.
At the current share price, those payments would represent dividend yields of approximately 4.4% and 4.5%, respectively, before taking any potential benefit from franking credits into account.
I think that is a solid level of income from a business I would also be comfortable owning for the long term.
What would make me cautious?
NAB still faces the same pressures as the rest of the banking sector.
Competition for customers can put pressure on margins, while weaker economic conditions could increase bad debts and slow credit growth.
The shares also would not look nearly as interesting if earnings failed to grow as expected.
Those are risks I would keep in mind, particularly after the strong performance Australian bank shares have delivered over recent years.
Foolish takeaway
At $38.48, I think the NAB share price is a buy.
The valuation looks reasonable rather than cheap, but I like the bank's business banking position and the prospect of earnings moving higher in FY27.
Add a fully franked prospective dividend yield of around 4.4% to 4.5%, and I think investors are being offered a good balance of income and potential capital growth at today's price.
