The National Australia Bank has unveiled a share buyback worth up to $2.5 billion, making it the second major bank to return surplus capital to investors while continuing to support customers through the pandemic with loan deferrals.<\/p>\n
NAB told the ASX on Friday morning it planned to buy shares back on the open market starting in mid to late-August, following ANZ\u2019s $1.5 billion share buyback announced last week.<\/p>\n
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The buyback comes just 16 months after Ross McEwan announced a $3.5 billion capital raising.<\/span>Credit:<\/span>Bloomberg<\/cite><\/p>\n NAB was quick to launch a $3.5 billion capital raise in March last year in an effort to fortify its balance sheet against uncertainty brought on by the arrival of COVID-19 cases to Australia. Now, with vaccines rolling out around the world and the Australian economy in a better-than-expected position, NAB has decided to return money to shareholders through the buyback.<\/p>\n Chief executive Ross McEwan said in a statement the bank was in a good position to return surplus capital while continuing to offer financial support for customers affected by the pandemic, as case numbers rise in Sydney and the city remains in perpetual lockdown.<\/p>\n \u201cOur support for customers and colleagues continues through ongoing lockdowns and as the COVID19 situation evolves,\u201d Mr McEwan said. \u201cAt the same time, NAB\u2019s strong financial performance, combined with the divestment of MLC Wealth, has created an opportunity for NAB to reduce our surplus capital while retaining a strong balance sheet during these uncertain times.\u201d<\/p>\n Market watchers have predicted the upcoming corporate earnings season will be rife with capital returns to shareholders, following the defensive position taken by ASX-listed companies through the pandemic.<\/p>\n All of the major banks are sitting on billions of dollars in excess capital after the Australian Prudential Regulation Authority told banks to suspend dividends last year and the major players took provisions for bad debts that ended up being overly cautious.<\/p>\n Morningstar analyst Nathan Zaia said he expected all the big four banks to return capital over the next two years, adding dividends or share buybacks would likely be introduced gradually to protect the bank against further unexpected challenges.<\/p>\n \u201cThey won\u2019t do it in one big hit in case something else does pop up. That could be regulatory changes, penalties or the pandemic could last longer than expected,\u201d Mr Zaia said. \u201cThe approach they have taken is rational.\u201d<\/p>\n Mr Zaia said NAB\u2019s decision to raise capital in March last year was overly cautious, and it was now unfortunate the lender had to buy shares back at around $26 per share as opposed to around $14, the price they were sold.<\/p>\n \u201cEven at the time, we didn\u2019t think they needed to do it [the capital raise],\u201d he said. \u201cIt\u2019s not a good look, raising money and buying back at those prices, but it\u2019s still our preferred option. What\u2019s been done has been done, you can\u2019t undo it.\u201d<\/p>\n The Market Recap newsletter is a wrap of the day\u2019s trading. <\/i><\/b>Get it each weekday afternoon<\/i><\/b>.<\/i><\/b><\/p>\nMost Viewed in Business<\/h2>\n
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