National Australia Bank Ltd. (ASX: NAB) shares have had a bumpy start to the year. The Aussie bank is trading at $18.07 per share at the time of writing. This is down 26.63% from where it started 2020 at $24.63.
So with all that’s happening on the ASX right now, is the NAB share price in the buy zone?
Why the NAB share price has slumped lower in 2020
The S&P/ASX 200 Index (ASX: XJO) is down 12.92% this year which means NAB shares are underperforming the index by quite a margin.
It’s not the only ASX bank share doing it tough right now. However, NAB has a large business banking segment that could be weighing on shareholders’ minds.
The coronavirus pandemic has spooked investors and raised question marks about global economic growth. Closer to home, many are wondering about loan performance in a downturn and the NAB share price has been sinking as a result.
NAB recently announced $807 million worth of pandemic-related provisions in its half-year earnings. The government stimulus programs are helping to prop up the economy but they won’t last forever.
However, there are signs that things are improving. Even the ‘best case’ forecasts have been bettered here in Australia and the economy is starting to re-open.
That could be good news for the NAB share price and investors. If businesses can start generating cash flow sooner than expected, loan impairments and lost earnings may be mitigated.
I think ASX bank shares can continue to be strong dividend shares in the future. That’s despite recent dividend cuts which will affect short-term portfolio earnings.
There are some who believe the neobanks will rise up and overtake the Big 4 in the coming decade. Even if that is the case, NAB has a stake in that game through its ownership of UBank.
Foolish takeaway
If you’re a buy and hold investor, I feel the NAB share price could represent a bargain at $18.07.
ASX bank shares could be in for a bumpy ride in 2020 but I still think the long-term picture is positive.
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More reading
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- 2 ASX 200 shares to watch on Tuesday
- How to value the big four ASX banks
- Where to invest $5,000 into ASX 200 shares immediately
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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