Forget Murali versus Warnie, what about the tussle for the title of “Australia’s biggest bank”? The CBA got within 1c of taking it on Thursday but then NAB recovered some territory on Friday, denying David Murray the prize he has chased for more than 10 years.
From the first August 6 sealed section
After at least 15 years as “Australia’s biggest bank”, poor old NAB appears set to surrender its hard won crown today. The Commonwealth Bank moved to within 1c of claiming the title in trading yesterday and we’ve got some very specific figures we can quote.
NAB recently advised the market that it has 1,507,731,744 ordinary shares on issue. With the stock falling 29c to $26.33 yesterday, this gave it a market capitalisation of $39,698,576,919.
The CBA recently advised that is has 1,264,031,062 ordinary shares on issue. With the stock falling 22c to $31.40 yesterday, this gave it a market capitalisation of $39,690,575,535
Therefore, NAB’s lead is down to only $8,001,385.
A 1c rise in the CBA share price adds $12.64 million to its market capitalisation whilst a 1c fall in the NAB share price reduces its value by $15.08 million. You can’t get any closer than that folks.
We’ve now alerted the market to this impending milestone today and expect diligent analysts and finance hacks to run-off and crunch the numbers, telling us exactly how long NAB held the title for in the Saturday papers if the mantle does indeed pass to CBA in Friday trading.
We’ll update the figures in today’s second edition which will be going out after the market closes at 4pm.
When 30 per cent of the CBA was first floated on September 12, 1991, the Hawke Government accepted a price of $5.40 a share, even though the stock closed at $6.46 on the first day. With 800 million shares on issue at the outset, Labor happily sold at the knock-down valuation of just $4.32 billion, although the market valued it at $5.2 billion on the first day.
NAB shares rose 4c to $7.30 on September 12, 1991, giving it a market capitalisation of $8.83 billion, based on its 1.21 billion shares on issue at the time.
However, it was only back in March of 1991 when NAB unveiled the biggest rights issue in Australian history – a one-for-five offering at $5.25 a share which raised $1.055 billion. NAB shares were trading at $6.26 on the day the rights issue was announced, valuing the bank at $6.26 billion. The rights issue expanded NAB’s capital base by 200 million shares from 1 billion to 1.2 billion.
Therefore, the Commonwealth Bank started life as a public company with NAB worth $3.51 billion or 70 per cent more than the still government-controlled operation.
It has taken a full 13 years but they’ve finally claimed the crown. Of course, this would never have happened if both banks hadn’t spent billions getting into funds management.
This is because NAB paid $4.6 billion in cash for MLC whereas the $8 billion CBA takeover of Colonial was an all-scrip affair. For this reason, we really should look at total shareholder returns which takes dividends, capital returns and share buybacks into account.
Unfortunately, we haven’t got the data or the model to crunch these numbers so using the more basic measure of share price performance, it does show that David Murray’s Sydney-based CBA has outperformed its traditionally bigger Melbourne rival.
The Hawke government certainly looks silly selling those 239 million shares at $5.40 a pop because investors have received about $13 in fully franked dividends whilst still holding stock to this day worth $31.40. Turning $5.40 into $43.40 is a return of more than 800 per cent.
Over the same period, NAB shares have risen from $7.24 to $26.33 and when you consider its $15 in dividends, the total return of $41.33 equates to about 570 per cent. Not bad but not as good as the CBA.
NAB shares closed up 14c today at $26.47, while CBA were down just 1c to $31.39. This means NAB has retained its position as “Australia’s biggest bank” and takes a 16c buffer into Monday’s trading.