TOP News

Money: Why National Australia Bank Ltd (ASX:NAB) is my favourite big bank

Drought-hit farmer 'shocked' by banker's comment

  Drought-hit farmer 'shocked' by banker's comment Debbie Viney's bank manager visited for a property inspection, but what he had to say was beyond the pale, she tells A Current Affair.Ms Viney said she met Rabobank executive Peter Stevens at a farm show six years ago, where he told her he could give her a cheaper mortgage than the one she had.

Leith Williamson alleges the National Australia Bank (NAB) allowed her former partner to secure hundreds of thousands of dollars in loans in her name.© AAP Image/Joel Carrett Leith Williamson alleges the National Australia Bank (NAB) allowed her former partner to secure hundreds of thousands of dollars in loans in her name. Nearly everyone has some sort of exposure to the big bank shares of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp(ASX: WBC), Australia and New Zealand Banking Group(ASX: ANZ) and National Australia Bank Ltd(ASX: NAB).

If you’re invested in an Australian-focused index fund like Vanguard Australian Share ETF(ASX: VAS) you have big bank exposure. Large-cap focused LICs like Argo Investments Limited(ASX: ARG) give exposure. You are probably invested in banks through your superannuation too if you’re invested in an Australian shares fund option.

Against the grain - Australian banks face rural lending reckoning

  Against the grain - Australian banks face rural lending reckoning Australian potato farmer Tom Fox says he had never missed a bank payment in two decades before a delay sending a shipment to Indonesia during a trade dispute between the countries prompted his lender to force him into receivership in 2013. Australian potato farmer Tom Fox says he had never missed a bank payment in two decades before a delay sending a shipment to Indonesia during a trade dispute between the countries prompted his lender to force him into receivership in 2013.

I personally believe most Australians have far too much exposure to the big banks, just for diversification’s sake alone, not even considering the questionable near-term growth outlook.

They are all exposed to the same risks and the same opportunities, so it makes little sense to have a quarter or more of your portfolio allocated there.

However, I can understand if some investors still want to have some a bit of exposure to the banks. So, if I had to pick one it would be NAB.

NAB seems to be fairing a bit better out of the Royal Commission compared to CBA, ANZ and AMP Limited(ASX: AMP). This could mean that any recommendations or fines affect NAB less.

The main reason why I prefer NAB is that it is actively working with some of the fast-growing businesses which could be sources of growth away from the mortgage sector. Some of the businesses I’m talking about are REA Group Limited(ASX: REA), Xero Limited(ASX: XRO) and Afterpay Touch Group Ltd(ASX: APT).

Foolish takeaway

These businesses are the ones that are growing and this is where banks should be focusing. NAB currently has a grossed-up dividend yield of 10.3% assuming the dividend is maintained. If it can maintain this indefinitely then that’s a nice return for shareholders, however I wouldn’t want to make that bet.

'That's my bad': NAB boss admits bank incentives spur bad behaviour .
Financial incentive systems inside banks have encouraged poor behaviour and are “seriously overrated” as a positive motivational tool for staff, says National Australia Bank chief executive Andrew Thorburn. Mr Thorburn said incentives were a necessary part of a market system.“People respond to encouragement, and hope and possibility and potential. That is how we are wired. They [incentives] can be seriously overrated in terms of the motivational impact,” he told an Australia British Chamber of Commerce event in Melbourne on Wednesday.“Money is part of it but I think it is much deeper.

See also