In what could be seen as a weekend delight for its shareholders, Australia’s third-most valued bank – National Australia Bank (ASX:NAB) – on Friday announced the buy-back of shares worth AU$2.5 billion.
NAB, in a statement before the market opening on Friday, said that it intends to buy back its ordinary shares on-market to manage its Common Equity Tier 1 (CET1) towards its target range of 10.75–11.25%.
“Through the pandemic, NAB has continued to build its financial strength while providing significant support to our customers and colleagues,” NAB Group CEO Ross McEwan said.
The mega buyback would lead to reduction of the CET1 ratio of the bank at level 2 by 60 basis points, the bank informed exchanges. The bank had CET1 capital ratio of 12.37% at Level 2 and 12.4% at Level 1, as of 31 March 2021 – well above the minimum requirement of 10.5% set up by the Australian Prudential Regulation Authority (APRA).
After the buyback, which is expected to commence next month, the CET1 ratio at level 2 will come down to 11.8%.
“Our target CET1 range reflects a balance between retaining a strong balance sheet through the cycle, supporting growth and recognising the importance of capital discipline to improve shareholder returns. We consider the on-market buy-back to be the most appropriate mechanism to achieve our previously stated bias towards reducing share count, which will help drive sustainable ROE benefits,” Mr McEwan added.
According to the notification released by the bank on the ASX, it expects the buyback to begin on 13 August 2021 and end by 29 June 2022.
Shares of NAB were trading at AU$26 a piece, up 0.89% after the announcement was made.
Last week as well, another Big 4 bank – Melbourne-headquartered ANZ Banking Group Ltd (ASX:ANZ) – became the first domestic bank to announce that it would return up to AU$1.5 billion to its shareholders by way of the buyback.