The National Australia Bank Ltd. (ASX: NAB) share price has been smashed in 2020, but if you’re a Foolish investor, you’re probably thinking longer term.
While the S&P/ASX 200 Index (ASX: XJO) is down around 15% this year, the Aussie bank’s shares have slumped 35%. It’s far from the only ASX bank to feel the heat from investors amid the recent bear market.
But rather than focus on the NAB share price right now, where will it be in 1 year?
Where the NAB share price will be in 1 year
I think there are a lot of factors weighing on the bank’s shares right now. Let’s look at the current situation.
NAB recently announced a soft half-year earnings result headlined by a 51.4% drop in cash profit. The popular measure of profitability fell to $1,436 million or $1,035 million on an adjusted basis.
On top of that, the bank announced $807 million worth of impairments in relation to COVID-19. That’s not good news for the NAB share price which has slumped in 2020.
But let’s look ahead to May 2021. Where will the NAB share price be after next year’s half-year result?
The economy is already starting to come back to life after the brief coronavirus lockdown period. If Australia continues to flatten the curve, the business impact could be mitigated and the bank’s balance sheets may remain intact.
There is still the issue of real estate valuations. While stimulus measures have helped the economy, Aussies could be under pressure with their home loan repayments.
Add to that the commercial real estate side of things. Shopping centres and CBD office buildings may not be at full capacity by May 2021. This could mean more writedowns and impairments for the Aussie bank which could weigh on the NAB share price.
On the plus side, Australia’s tourism and education sectors may pickup. A weaker Aussie dollar could drive exports in 2020 and mitigate the economic impact of COVID-19.
Foolish takeaway
There’s a lot of weighing up to do for investors right now. I think the Aussie banks will remain in good shape and I believe the NAB share price will recover.
The bank’s shares are trading at $16.03 this morning but that could look like a bargain when we look back in 1 year’s time.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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