NAB Share Price up on $750 Million Cap Raise (ASX:NAB)

The National Australia Bank Ltd [ASX:NAB] share price is up 1.84% today after announcing it’s looking to raise $750 million through NAB Capital Notes 5.

What are Capital Notes 5?

In the bank’s words:

They are convertible, subordinated notes that are scheduled to pay quarterly, floating rate non-cumulative Distributions in cash subject to the satisfaction of certain conditions. Those Distributions are expected to be franked at the same rate as dividends paid on Ordinary Shares. The Distribution Rate is equal to the sum of the Bank Bill Rate plus a Margin (expected to be in the range of 3.50% to 3.70%), adjusted for NAB’s Tax Rate.

The notes qualify as additional tier 1 capital NAB once issued. NAB is looking to use the money for general corporate purposes.

Along with the announcement, NAB released a prospectus and the offer closes on 11 December 2020 at 5pm.

NAB also took the chance to announce their annual general meeting will be on 18 December.

Unemployment has increased to 6.9% from 5.1% at the beginning of the year. Roy Morgan on the other hand estimates unemployment is higher at 12.9%.

This is even with JobKeeper and JobSeeker in place.

What could happen next?

Australian banks are very exposed to housing, with 60% of their loan totals made up of home mortgages.

Much of the growth we’ve seen in recent years in property has come from immigration and population growth, particularly in Sydney and Melbourne. The challenge is what could happen next to property with virtually no immigration.

SGS Economics and Planning for example, forecasts greater Sydney population will increase by just 500 in the 12 months to June. This is a stark difference to the 92,500 increase they were forecasting in 2021 before the pandemic hit.

At time of writing, NAB’s share price is trading at $21.59, up from yesterday’s close at $21.20. But shares are trading 22% lower than in February.

Are our banks safe? Rum Rebellion Editor Vern Gowdie tackles that question and more in his free report ‘How Do I Protect My Savings and Are Banks Safe?’.

You can access it here.


Selva Freigedo

Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.

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