Why is the NAB share price higher today?
Shares in the top 4 banks have risen nearly 60% in the last 12 months.
Shares in National Australia Bank (ASX: NAB) were among the most traded shares on the ASX boards. The stock rose nearly 0.7% in early trading and at the time of writing, was still up 0.4% at $27.02 each.
What is tipping the NAB stock price higher?
Sentiment in NAB shares has been helped by its announcement late on Monday that it would buy out Citigroup’s Australian consumer operations in a $1.2 billion deal that will see it become the second largest credit card issuer in Australia.
The transaction includes Citi’s home lending portfolio, unsecured lending, retail deposits, and private wealth management business. NAB will fund the $1.2 billion deal from existing balance sheet resources.
NAB chief executive Ross McEwan said the deal would bring scale and expertise to the unsecured lending segment, particularly in credit cards, which he said was particularly attractive for the bank.
“We don’t believe that the credit card business is in massive decline. We saw it drop because of COVID… but it’s starting to come back up again and we believe it will stay a very strong part of the payments structure,” McEwan said.
NAB is the country’s fourth largest credit card issuer currently. Once the deal is completed, NAB will jump to the number 2 spot, after including Citi’s “white label” credit cards for institutions such as Qantas, Bank of Queensland, Coles and Suncorp.
Investors are also betting that the major bank will outline strong earnings trends when it posts a quarterly update later this week.
The trend was reflected in Suncorp’s better than expected results and share buyback announcement on Monday. Top lender Commonwealth Bank (ASX: CBA) is expected to further reinforce that in its results on Wednesday.
NAB outlined the state of its strong balance sheet last month after announcing a hefty on-market share buyback worth up to $2.5 billion. After accounting for the buyback and the sale of its MLC Wealth division, the bank’s Level 2 CET1 capital ratio will drop to 12.15%, which is still well above the target 10.75-11.25% range.
Some analysts are betting that could mean another round of a multi-billion dollar share buyback from the bank later this year.
Post the Citi deal, Goldman Sachs analysts have retained their "Buy" rating on the stock and a $30.34 price target on the bank’s share price.
That would imply a further potential upside of 12.5%. NAB shares are already up nearly 60% over the last 12 months.
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