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Why is the NAB share price sliding today?


NAB shares have performed better than its major bank peers, rising nearly 19% over the last 12 months, so why is it sliding today?

Shares in National Australia Bank (ASX: NAB) are among the worst performers in financial stocks on Wednesday.

At the time of writing, the stock was down 3.8% to $30.56 each.

By comparison, rivals Australia and New Zealand Banking Group (ASX: ANZ) and Westpac (ASX: WBC) were trading 0.6% and 1% lower respectively, while Commonwealth Bank (ASX: CBA) was marginally higher.

Why has the NAB stock price tumbled?

A large part of today's decline in NAB shares is on account of the stock going ex-dividend on Wednesday.

In simple terms, that means today is the record date for paying the interim dividend that the company declared at its half year results last week.

Typically, the share price drops by the amount of the dividend paid to reflect the fact that shareholders joining the register after this date are not entitled to the payment.

NAB reported a 4.1% improvement in half year cash profit to $3.48 billion, in line with analyst expectations. Statutory net profit for the 6 months to March 31 also rose 10.7% to $3.55 billion, largely thanks to stronger volumes, especially in its business and institutional segments.

That allowed the Big Four lender to declare a higher-than-expected interim dividend of 73 cents a share, reflecting a payout ratio of 66.9%. NAB had paid a 60 cents a share dividend a year ago.

Eligible shareholders will receive this dividend payment on July 5 on a full-franked basis.

Mixed outlook

While much of today's decline reflects this dividend, NAB shares are down further amid cloudy investor sentiment in the financial sector that is flowing from Wall Street.

A US inflation report due on Thursday AEST could show consumer prices remain elevated, prompting fears over higher US interest rates fuelled by the surging inflation on top of the US Federal Reserve lifting rates by 50 basis points earlier this month.

Typically, rising interest rates are beneficial to banks as they provide a bigger margin buffer to lenders. But that trend could also turn out to be somewhat negative for Australian banks – which rely on overseas markets for a part of their funding, because it increases their cost of funds.

It comes at a time when the major lenders, including NAB, are grappling with higher costs in the form of higher wages, more staff to boost processing times and investment in technology.

In fact, NAB last week joined rival ANZ in walking away from its target of absolute cost reduction. NAB said it would not focus on the previously flagged target of $8 billion, because of emerging inflationary pressures.

Considering buying NAB shares?

If you are keen to buy shares in NAB, you should consider investing through an online share trading platform.

Not all platforms offer the same list of stocks. Some trading platforms offer US stocks only, so make sure to select a platform that offers ASX-listed stocks.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms available for Australian investors.

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Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.

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