Is NAB Fairly Valued? 4 Key Financial Metrics to Watch

April 30, 2025 05:06 PM AEST | By Team Kalkine Media

Is NAB Fairly Valued? 4 Key Financial Metrics to Watch — Image source: Shutterstock

Assessing NAB's Workplace Culture

An often-overlooked metric is a company’s internal culture. Data from HR platforms reveals NAB holds an employee satisfaction score of 3 out of 5, slightly below the sector average of 3.1. While not a financial indicator, workplace morale can influence long-term performance by affecting staff retention and operational efficiency.

Net Interest Margin: The Profitability Lens

NAB generates 81% of its income through lending, making the net interest margin (NIM) a crucial metric. This margin reflects the spread between what the bank earns from loans and what it pays to depositors. NAB’s NIM stood at 1.71%, slightly under the sector average of 1.78%. Though modest, even small variations in NIM can significantly influence earnings.

ROE: Gauging Profitability Strength

Return on Equity (ROE) helps measure how efficiently a bank uses its capital. NAB delivered a ROE of 11.4% over the past year, well above the sector average of 9.35%. This suggests strong capital utilisation and underlines NAB’s profitability compared to peers such as Westpac (ASX:WBC) and ANZ Group (ASX:ANZ).

CET1 Ratio: Risk Readiness

The Common Equity Tier 1 (CET1) ratio is vital for evaluating a bank’s resilience. NAB posted a CET1 ratio of 12.35%, surpassing the industry average and signalling a healthy capital buffer. This ratio reflects the bank’s capacity to absorb shocks without threatening its financial stability.

Dividend Valuation Insights

Dividend discount modelling (DDM) offers a lens into share valuation by factoring in future dividend growth and risk. Based on a full-year dividend of $1.69, NAB’s fair value is calculated around $35.74. Adjusting for forecast dividends increases this to $36.16. Factoring in franking credits lifts the valuation to $51.66. With NAB’s current price at $35.95, the results suggest a relatively fair valuation range.

For those monitoring ASX dividend stocks, NAB’s consistent payouts, coupled with robust capital metrics, make it a company worth analysing further.

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