Investors may be wondering if National Australia Bank at around A$45.36 is offering good value right now, or if most of the opportunity has already been priced in.
The share price has shown mixed recent moves, with a 7 day return of 8.5%, a 30 day return decline of 2.2%, and longer term returns of 7.0% year to date, 42.5% over 1 year, 85.1% over 3 years, and 116.6% over 5 years.
These returns sit against an ongoing flow of broader market news about Australian banks, including regulatory settings, interest rate expectations, and competition across lending and deposits. For National Australia Bank, investors are watching how these sector wide themes may relate to its share price and valuation.
On Simply Wall St’s valuation checks, National Australia Bank scores 2 out of 6. This sets up a closer look at traditional valuation tools and hints at an even more complete way to think about value that will be covered at the end of this article.
National Australia Bank scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
The Excess Returns model looks at how much value a bank can create above its cost of equity, based on its book value and sustainable earnings power.
For National Australia Bank, book value is A$20.59 per share and stable earnings per share are estimated at A$2.61. These earnings are based on weighted future Return on Equity estimates from 13 analysts, with an average Return on Equity of 11.67%. The cost of equity is A$1.74 per share, which leaves an excess return of A$0.87 per share.
The model also uses a stable book value estimate of A$22.33 per share, sourced from weighted future book value estimates from 10 analysts. Putting these inputs together, the Excess Returns valuation points to an intrinsic value of about A$42.51 per share.
Compared with the current share price of around A$45.36, this indicates the stock is about 6.7% above this valuation measure. This is a relatively small gap and within a reasonable margin of error for this kind of model.
Result: ABOUT RIGHT
National Australia Bank is fairly valued according to our Excess Returns, but this can change at a moment’s notice. Track the value in your watchlist or portfolio and be alerted on when to act.
For a profitable bank like National Australia Bank, the P/E ratio is a practical way to think about value because it links what you pay per share to the earnings the bank is currently generating. Investors generally accept that higher growth expectations or lower perceived risk can justify a higher P/E, while slower expected growth or higher risk usually line up with a lower P/E as a more normal range.
National Australia Bank is trading on a P/E of 19.63x. That sits close to the peer average of 20.05x and above the wider banks industry average of 11.28x. To go a step further, Simply Wall St’s Fair Ratio for National Australia Bank is 22.57x. This Fair Ratio is a proprietary estimate of what the P/E could be given factors such as the bank’s earnings profile, its industry, profit margins, market capitalization and specific risks.
Because the Fair Ratio blends these company specific inputs, it can give a more tailored view than a simple comparison with peers or the broad industry, which may have different growth, risk and profitability characteristics. With the current P/E of 19.63x sitting below the Fair Ratio of 22.57x, this framework points to the shares trading below that fair multiple.
Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as a simple way for you to put a story around the numbers by linking your view on National Australia Bank’s future revenue, earnings and margins to a financial forecast, a Fair Value, and then a clear comparison with today’s share price. All of this is contained within an accessible tool on Simply Wall St’s Community page that updates automatically when fresh news or earnings arrive. It can reflect very different viewpoints, such as a more optimistic Narrative that lines up with a Fair Value of A$50.64 and assumes faster growth and higher margins, or a more cautious Narrative closer to A$34.00 that leans on slower growth and tighter profitability, helping you see which story you believe in and whether the current price looks high, low or roughly in line with your own assumptions.
For National Australia Bank however, we will make it really easy for you with previews of two leading National Australia Bank Narratives:
🐂 National Australia Bank Bull Case
Fair value in this bullish narrative: A$50.64 per share
Discount or premium to this fair value at A$45.36: about 10.4% discount
Assumed annual revenue growth: 8.13%
Assumes faster revenue growth supported by digital modernization, AI use in lending and customer interactions, and ongoing simplification of the business model.
Leans on stronger profit margins, helped by low cost deposit funding, premium urban customer focus, and operating leverage from productivity programs.
Takes on risks such as tougher digital competition, housing market sensitivity, and higher regulatory and compliance costs, but still supports a higher earnings multiple.
🐻 National Australia Bank Bear Case
Fair value in this more cautious narrative: A$43.01 per share
Discount or premium to this fair value at A$45.36: about 5.5% premium
Assumed annual revenue growth: 5.52%
Assumes steadier revenue growth from digital banking and payments, housing finance, and SME lending, rather than a step change in earnings power.
Builds in slightly lower profit margins over time as costs, technology investment, and regulation weigh against productivity gains.
Highlights long term risks from fintech competition, demographics, asset quality in business lending, and ESG requirements that could cap valuation multiples.
These two Narratives give you clear bookends for National Australia Bank. You can decide which story feels closer to your own expectations and then adjust the assumptions directly inside the Narrative tool to build your personal view of fair value.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include NAB.AX.
