There were rumours around late last week that the National Australia Bank was planning to extend its current multi-billion-dollar buyback and Thursday it did just that. Kind of.
Rather than an extension, it is in fact a new $2.5 billion buyback that replaces the existing $2.5 billion buyback that has just been completed.
Subject to market conditions, the new buy-back will commence following the release of the NAB’s half-year results on May 5.
CEO Ross McEwan said in Thursday’s announcement the $5 billion in combined potential buy-backs “supports our ambition to reduce share count and increase sustainable [return on equity] benefits for our shareholders”.
“Our capital management strategy reflects the importance of maintaining a strong balance sheet through the cycle while allowing us to continue to support growth and deliver improved shareholder returns,” Mr McEwan said.
The buyback means the bank will have returned most of the $5.5 billion it raised in March 2020 as the first wave of the pandemic was rolling across the economy and country generally.
The impact of COVID-19 on the banks was far milder than initially expected and NAB is now reversing the trend of that share dilution through the two buy-backs.
It is also a de facto acknowledgement by the NAB that it really can’t use the money to finance any more lending activity.
