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The share price of National Australia Bank is currently at a 6 year low after being rocked by a recent Royal Commission hearing which criticized the behavior of NAB Executives and the companies work culture.
The commission hearing which was largely dedicated to the "Fee for no service" scandal which dates back to 2008 and involves Australia's largest banks charging fees to deceased people, is likely to result in over $1 billion being paid back to customers.
It is important to note however that NAB's payments are only expected to be $100 million with most of the burden falling on AMP, and other major Australian banks.
Despite NAB playing a smaller part in this scandal, highly publicized comments made by Commissioner Ken Hayne along with widespread media attention has caused NAB share prices to stoop to a low of $22.84 in December despite increased earnings.
The last time NAB shares dropped this low was in 2012 when prices were as low as $21.13. Since that time in 2012 however adjusted earnings have increased 42% from $3.84 billion to $5.45 billion and NAB's PE ratio, dividend yield and earnings per share have all increased substantially while debt to equity ratio has decreased, indicating that that despite Their negative media attention and falling stock price NAB financials are in comparatively better shape then they were 6 years ago when the share price was similar.
Information extracted from NAB annual reports
In the Mid 1960's, notorious investor Warren Buffet invested $13 million into buying 5% of credit card company American express, which has delivered spectacular results for the worlds best investor.
Why did he invest at that time? because American express had just been hit with the 'Salad oil scandal' which left them with a one off expense of $60 million worth of non retrievable loans and plummeting stock prices, despite all ordinary operations remaining stable.
Could you profit from the "Fee for no Service" scandal just like Warren Buffet profited from the "Salad Oil Scandal"?
Christian King,
Director, CTK Accounting
