NAB’s recent return has been extraordinary. What could happen next?
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
The returns from National Australia Bank Ltd (ASX: NAB) shares have been very impressive over the past year. The stock has risen by 40% in the last 12 months, as illustrated in the chart below. Additionally, NAB’s regular dividend adds an attractive benefit for investors.
It’s rare for a business as large as NAB to go up 40% in such a short period of time. Investors may be wondering if FY25 could be as good as the last 12 months.
Past performance is not a reliable indicator of future performance, and I’d be shocked if NAB shares produced a return of 40% in the 2025 financial year. But, it’s not impossible, I suppose.
Let’s have a look at what some analysts think the ASX bank share may be able to achieve.
Profit and dividend forecast
NAB recently reported its FY24 result, which sadly included a 6.1% decline in statutory net profit to $6.96 billion and an 8.1% drop in cash net profit to $7.1 billion.
The ASX bank share blamed home lending competition and higher term deposit costs for its decline of the net interest margin (NIM), which impacted overall profits. It has also been investing in various technology modernisation and compliance capabilities. Increasing salary costs were also a factor.
In addition to the difficult conditions above, NAB reported an FY24 credit impairment charge of $728 million amid a deterioration in asset quality, meaning some borrowers are struggling.
However, clearly, investors have not let the bad news stop them from sending the NAB share price higher.
According to UBS forecasts, NAB’s profit is projected to rise slightly to $7.19 billion in the 2025 financial year. I’m not sure how justified the bank’s 40% share price rise is given how little profit may rise in 2025.
Earnings are then expected to go backwards slightly in FY26 and again in FY27.
The NAB fully franked dividend yield is projected to be 4.4% for FY25.
NAB share price target
A price target tells us where a broker thinks the share price will be in 12 months from the time of the note.
UBS currently has a price target of $35 on the ASX bank share, which implies a possible decline of 12% from today’s level.
In other words, the broker suggests that while investors may receive a dividend return of 4.4%, the overall shareholder return could be negative 7.6% over the next year.
If that decline does happen, then long-term NAB shareholders may still be up on their original purchase price, but FY25 could be a disappointing year compared to FY24 in terms of the share price performance.
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
