NAB - National Australia Bank

[Bill M]

It also means their SP will go down by 30c instead of 83c on the day - maybe not all bad.

The Cap raising is the real killer - that's why I invested in banks that had already raised before the crash.

These capital raisings happened during the GFC and this one isn't much different. I regard this as one of those rare opportunities to top up on a good company at a discounted rate. I did it during the GFC and I will be doing now. I'll take my full 30K allocation thank you very much. Here is a bit more info from the announcement made this morning, my bolds:
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The Placement Shares are expected to settle on Thursday 30 April 2020, and be issued and commence trading on ASX on Friday 1 May 2020. Placement Shares will rank equally with existing NAB ordinary shares but will not be entitled to receive the 2020 interim dividend. Details of the SPP Under the SPP, NAB will offer eligible shareholders the opportunity to apply for up to A$30,000 of new fully paid NAB ordinary shares (SPP Shares), without incurring brokerage, commissions or other transaction costs. “Eligible shareholders” will be registered NAB shareholders, as at 7.00pm on Friday 24 April 2020 (Melbourne time), who have a registered address and are resident in Australia or New Zealand, and are not in the United States or acting for the account or benefit of any person in the United States or otherwise excluded from participating. The Issue Price of SPP Shares will be the lower of: - the Placement Price, being A$14.15; and - the VWAP5 of NAB ordinary shares traded on ASX during the five trading days up to, and including, the SPP closing date (expected to be Friday 22 May 2020) less a 2% discount, rounded down to the nearest cent.
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[how02]

These capital raisings happened during the GFC and this one isn't much different. I regard this as one of those rare opportunities to top up on a good company at a discounted rate. I did it during the GFC and I will be doing now. I'll take my full 30K allocation thank you very much. Here is a bit more info from the announcement made this morning, my bolds:

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This was my thinking as well. The current stock price for NAB is the lowest it has ever been in history, even lower than the global financial crisis. Looking at 2008 it recovered very quickly, this time around won't be any different in my opinion.

 

[Bill M]

This was my thinking as well. The current stock price for NAB is the lowest it has ever been in history, even lower than the global financial crisis. Looking at 2008 it recovered very quickly, this time around won't be any different in my opinion.

Let me just say this without detracting from the thread too much. Every single capital raising I took up during the GFC (about 6 of them) turned out to be profitable and they were not only the banks. I think the best at the time was CBA at $26. Not saying this will be the same but I will be taking up my allotment.

 

[Dona Ferentes]

Shares will stay in trading halt to comply with the regulations...

"For the purposes of Listing Rule 17.1, NAB provides the following information:

There is a 4th but it's fluff that all companies post "not aware of any reason why the trading halt should not be granted". Can't see the point of that at all.

lawyers

 

[PZ99]

These capital raisings happened during the GFC and this one isn't much different. I regard this as one of those rare opportunities to top up on a good company at a discounted rate. I did it during the GFC and I will be doing now. I'll take my full 30K allocation thank you very much. Here is a bit more info from the announcement made this morning, my bolds:
---
The Placement Shares are expected to settle on Thursday 30 April 2020, and be issued and commence trading on ASX on Friday 1 May 2020. Placement Shares will rank equally with existing NAB ordinary shares but will not be entitled to receive the 2020 interim dividend. Details of the SPP Under the SPP, NAB will offer eligible shareholders the opportunity to apply for up to A$30,000 of new fully paid NAB ordinary shares (SPP Shares), without incurring brokerage, commissions or other transaction costs. “Eligible shareholders” will be registered NAB shareholders, as at 7.00pm on Friday 24 April 2020 (Melbourne time), who have a registered address and are resident in Australia or New Zealand, and are not in the United States or acting for the account or benefit of any person in the United States or otherwise excluded from participating. The Issue Price of SPP Shares will be the lower of: - the Placement Price, being A$14.15; and - the VWAP5 of NAB ordinary shares traded on ASX during the five trading days up to, and including, the SPP closing date (expected to be Friday 22 May 2020) less a 2% discount, rounded down to the nearest cent.
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No worries at all Bill. I frequently find with many companies I can just buy shares on market for less than the SPP so if NAB goes under $14 later on I'll stick a few pennies in

 

[Sharkman]

These capital raisings happened during the GFC and this one isn't much different. I regard this as one of those rare opportunities to top up on a good company at a discounted rate. I did it during the GFC and I will be doing now. I'll take my full 30K allocation thank you very much.

i'm leaning towards doing the same, just not willing to fully commit to it yet as it would go against my overall macro strategy of holding Aust based positions constant and only putting new funds into international equities. probably will just treat it as basically a free call option for now and see what happens over the next few weeks until "expiry".

 

[Knobby22]

Yea, Nah.

 

[cutz]

That dividend cut is going to be painful !!

I normally participate in capital raisings to avoid dilution but not this time, I'm with @Sharkman on this one.

 

[Sharkman]

That dividend cut is going to be painful !!

I normally participate in capital raisings to avoid dilution but not this time, I'm with @Sharkman on this one.

you wouldn't be buying it for the upcoming div though (the SPP units aren't entitled to it anyway), or even the next couple of divs, you'd be buying it for a potential long term recovery, and if we do end up getting one, then this would turn out to be a knockdown price. but who knows when (or if) that'll happen at this point.

what i'm trying to figure out for myself is once things do turn around globally, will i get better returns from NAB or better returns from international equities? given my view that our economy is turning into more and more of a one trick pony (mining) with every passing year, whilst other developed nations are seemingly going in the opposite direction and ramping up their secondary and tertiary sectors, would i be better off staying true to my overall macro strategy and give this a miss, to keep the 30K available for investing in international index ETFs?

one approach i considered for the WBC raising a few months ago (and will consider again here) is to subscribe to the SPP, then after taking delivery immediately turn around and sell ATM covered calls over the SPP units until they get called away. obviously no trading in NAB today, but i generally find ANZ options to be the closest approximation for NAB, and the 1 month ATMs for those were trading at around 50 IV. at that sort of IV 1m ATM is ~5.5% of the stock price, not bad compensation for the risk of winding up being "stuck" with those SPP units for longer than one would like.

 

[cutz]

you wouldn't be buying it for the upcoming div though (the SPP units aren't entitled to it anyway), or even the next couple of divs, you'd be buying it for a potential long term recovery, and if we do end up getting one, then this would turn out to be a knockdown price. but who knows when (or if) that'll happen at this point.

As much as I hate to admit I think any recovery is a long way away, especially for the banks, I really hope I'm wrong. Any spare cash I can scrape together I'll prob invest in the US using buy write or maybe not write strategies.

 

[how02]

As much as I hate to admit I think any recovery is a long way away, especially for the banks, I really hope I'm wrong. Any spare cash I can scrape together I'll prob invest in the US using buy write or maybe not write strategies.

I agree, I'm not expecting short term gains either but if you choose to invest now and have patience then it will be very rewarding.

 

[InsvestoBoy]

what i'm trying to figure out for myself is once things do turn around globally, will i get better returns from NAB or better returns from international equities? given my view that our economy is turning into more and more of a one trick pony (mining) with every passing year, whilst other developed nations are seemingly going in the opposite direction and ramping up their secondary and tertiary sectors, would i be better off staying true to my overall macro strategy and give this a miss, to keep the 30K available for investing in international index ETFs?

Outside the US, international equities haven't really done that much differently from AU.

VAS and VEU were created on the same day, quite close to GFC lows and VAS annual total return is 6.83%pa while VEU is 6.81%pa, according to the most recent Vanguard factsheets.

Even in the US, I think you would find that the story is really about US large cap growth stocks, mostly big tech. The annual returns of US large cap value indices, which have a sector composition closer to our own have similar returns to VAS.

Underperformance of our index in the post GFC period has more to do with value performance than country performance IMHO and that is largely a function of sector composition. Value underperformance historically has been largely driven by flattening yield curves and declining growth/inflation expectations and that is what we have seen post GFC.

My advice would to be cognizant of potential for recency bias. US large cap growth stocks are at extreme spreads (both price and valuation wise) to value, and our index composition mirrors value much more closely than growth. If those spreads mean revert, you might find yourself on the wrong side of stuff. That doesn't necessarily mean value goes up but potentially that it goes down a lot less than growth.

If there's any return to inflation, you'd expect commodities (which are unloved and at cyclical lows mostly) would do well. If the global yield curve steepens, that is generally a beneficial environment for value and certainly financials who derive their NIM from the curve spread.

Not to mention AUD factors. As you said "once things do turn around globally", the AUD which is deeply cyclical could rally hard and crush unhedged global returns. AUD performance post GFC was so strong that US and EU indexes priced in AUD didn't bottom post GFC until 2011-2012. You can also see below that SPX in AUD performed quite poorly in the 2002-2007 commodities boom.

SPX priced in AUD:

 

[Sharkman]

If there's any return to inflation, you'd expect commodities (which are unloved and at cyclical lows mostly) would do well. If the global yield curve steepens, that is generally a beneficial environment for value and certainly financials who derive their NIM from the curve spread.

Not to mention AUD factors. As you said "once things do turn around globally", the AUD which is deeply cyclical could rally hard and crush unhedged global returns. AUD performance post GFC was so strong that US and EU indexes priced in AUD didn't bottom post GFC until 2011-2012. You can also see below that SPX in AUD performed quite poorly in the 2002-2007 commodities boom.

all good points. but as is the case with everything, there are some if's. and when it comes to ASX index investing, it seems to me that those if's tend to lead back to one thing - commodities. these days, commodities doing well is getting close to becoming a hard requirement for our broader economy and index to do well in my view. other developed nations, particularly the US (but with the possible exception of Canada and NZ) don't seem to have such a heavy reliance on one sector.

the SPX in AUD terms did perform poorly in the commodities boom - very valid point. but there it is again - commodities - our pony's one trick. i'm not going to say that was a once in a lifetime boom, i don't know that. it could happen again. but i'm a bit edgy with pinning the hopes of my portfolio on a scenario where a lot of things probably need to go right.

i'm not avoiding local investing completely. as you say, it's cyclical and a return to global growth should see it outperform. but who knows how long we might be waiting for the cycle to turn. in the meantime, am i comfortable with ~33% of my portfolio as Aust exposure? sure. 50%? getting a bit too high, but ok. 75-100%? no way Jose! that's an awful lot of eggs in that basket, too many for my liking. YMMV.

 

[Klogg]

The possible alternative canvassed in the APRA letter, after deep, deep discussions with APRA, is not to issue cash but maybe introduce a compulsory DRP and/or buy back the equivalent on market. Obviously this is "request" is to apply not only to NAB but all ADI's and insurers.

I can see how my post was interpreted as referring to a specific poster but it wasn't meant in that light. Sorry if it was read in that way.

When the regulator 'requests' something, you either comply, or you're eventually forced to do it.

NAB divi down to 30c. They've had years of tailwinds, but will now face NIM pressures, in addition to increasing bad debts (rates can't really go lower).

As for assuming banks are the only place retirees can get a steady income - what about the other thousands of listed companies?

 

[InsvestoBoy]

all good points. but as is the case with everything, there are some if's. and when it comes to ASX index investing, it seems to me that those if's tend to lead back to one thing - commodities. these days, commodities doing well is getting close to becoming a hard requirement for our broader economy and index to do well in my view. other developed nations, particularly the US (but with the possible exception of Canada and NZ) don't seem to have such a heavy reliance on one sector.

I don't agree that commodities doing well is a hard requirement at all and I think you might be mixing up cause and effect there.

The index is heavily skewed towards cyclicals (Materials, Financials, Consumer Discretionary, Industrials). Cyclicals do well when commodities do well, but it isn't the commodities that are driving that, it's just a beneficiary like the others. Mining after all is just 6% of our GDP.

That said, I do agree the economic complexity of Australia is very low (https://www.afr.com/policy/economy/australia-is-rich-dumb-and-getting-dumber-20191007-p52y8i). But at the same time, it doesn't seem to have mattered for performance vs index like VEU, for all the extra economic complexity of the economies exposed to VEU, performance was essentially identical to ours in the post GFC period. Hence my point: sector composition (which drives factor performance), not economies. And the sector composition you are getting, ex US, is pretty much the same.

the SPX in AUD terms did perform poorly in the commodities boom - very valid point. but there it is again - commodities - our pony's one trick.

Nah, I am not talking about commodities, I am talking about AUD factors.

 

[Bill M]

I just took a look at the long term chart of NAB. It first hit these levels of around $15 a share back in 1997, some 23 years ago. It's been an amazing roller coaster ride in between.

Don't forget the SPP plan folks. Money has to be on by 22nd May 2020 if you are going to do it.

 

[Knobby22]

I just took a look at the long term chart of NAB. It first hit these levels of around $15 a share back in 1997, some 23 years ago. It's been an amazing roller coaster ride in between.

Don't forget the SPP plan folks. Money has to be on by 22nd May 2020 if you are going to do it.

There is support for all the banks at the present levels.
And the other good thing is that they are primarily in the Australian market, and luckily for NAB in particular, have no businesses such as in the UK for instance.
Still, I am a bit nonplussed. I am sensing an opportunity but am still struggling to be interested.

 

[Bill M]

The SPP closes tomorrow. NAB closed at $15.60 yesterday. Today it's looking like another up day so the NAB share price might rise as well.

This is what you need to consider, the SPP price per stock is $14.15. The current share price is $15.60. You are getting a great discount. Now things can melt down between now and the allocation date so it is not without it's risks but I am going to take my full allocation. Good luck with your choices.

 

[Dona Ferentes]

And, the uptake details are out


NAB closed the institutional raising and has expanded the retail component of the issue from $500m to $1.25bn.

Indeed the bank said “the strong interest required a scaling back”, which means that those 155,000 shareholders who put down on average $18,500 each for the new shares will not get all they asked for.

There is a range of issues around the ultimate fairness of the wider capital raising plan launched by the bank and the irony of seeking new money while paying a dividend at the same time.

In short, the bank made sure it got the money it needed first by going to institutional investors - even though 48 per cent of the register is “retail”.

There is also room to argue the bank did not get so much a strong response as a partial response from its vast shareholder base. It attracted a segment that was willing to speculate they might finally make some money from the raising which was priced at $14.15 - the stock is now $17.94

 

[Garpal Gumnut]

If you want to be in NAB you could do worse than NABHA which sits ahead of NAB when it eventually goes a-up.

I've been buying them in the low $80's mid $70's for years now, holding them for 3-4 years more as a proxy for cash type security and then selling them when they get in to the mid $90's. I bought some again quite recently. They are $100 securities and pay 1.5% above the cash rate at $100 unfranked and so far have not missed a payment. Only problem is you have to have a big bet and hold until they move up again.

gg