NAB Share Price Sinks on Neo Bank Aquisition (ASX:NAB)

Australia’s second largest bank in terms of market capitalisation National Australia Bank Ltd [ASX:NAB] has slipped today with news it has agreed to by neo bank 86 400.

At time of writing the NAB share price is down 0.59% or 14 cents to trade at $23.78 per share.

ASX NAB Share Price Chart - National Australia Bank

Source: Tradingview

With its second consecutive loss today, the NAB share price has given back over a week’s worth of gains — a trend shared by its banking peers.

NAB banks on digital

It’s becoming more and more accepted that the pillars of the Australian financial system — the Big Four Banks — are dying.

At least as we know them today.

Capitalism, with its glorious creative destruction, is helping to spring up new, more competitive institutions that are taking a swipe at the banks’ profits.

In fact, Commonwealth Bank of Australia [ASX:CBA] is so acutely aware of this they have founded their own ‘startup incubator’ in order to keep their brand competitive.

In a bid to future proof their earning, NAB today announced they have agreed to acquire neo bank 86 400 to accelerate UBank’s growth.

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86 400 has built and launched a mobile-led digital bank and was granted an authorised deposit-taking institution (ADI) licence in July 2019.

As of mid-January 2021, 86 400 has more than 85,000 customers, $375 million in deposits, $270 million in approved residential mortgages and 2,500 accredited brokers.

Numbers which seem like small change for our banking institutions.

NAB says the acquisition of 86 400 will accelerate UBank’s growth by combining its established customer base, brand and colleagues with 86 400’s experience and technology platform.

Commenting on the purchase, NAB COO Les Matheson said:

Bringing together UBank and 86 400 is consistent with NAB’s long-term strategy and growth plans and will enable us to develop a leading digital bank that can attract and retain customers at scale and pace.’

Who is this good for?

If you couldn’t tell, I was being slightly sarcastic about the whole creative destruction thing — sort of.

Having smaller entities go after the banks is a good thing. It means more competition which is better for the consumer.

The problem here is when the old oligopoly just buys up the competition, like NAB and CBA.

NAB already has about an 18% stake in 86 400 and will purchase the rest for approximately $220 million.

Though this is subject to the approval of the ACCC, APRA and the Treasury.

In my opinion, 86 400 was snapped up by NAB to raise sufficient capital to support its strategy.

A growing trend among Australia’s neo banks.

So, will this be good for NAB shareholders?

Maybe, if the right synergies are hit with UBank.

After all, you’d expect a larger costumer base to be a positive thing.

That’s assuming 86 400’s consumer base is happy to fall back into the arms of the traditional banking system they likely fled from.

If you want to read on about the dangers the banks could face in a post-pandemic world, or the dangers you could face from the banks, then check out this free report by market expert Vern Gowdie. In it, Vern also outlines the steps you should take now to protect your wealth. Click here to get your free copy.


Lachlann Tierney

For The Rub Rebellion

Lachlann Tierney is a writer for The Rum Rebellion and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. 

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