Silver lining is this: when the economy recovers, loan demand will recover too. And NAB is sitting on $360 billion of low cost deposits which they are paying very little interest on thanks to low interest rates, and which they can lend out at higher rates.
It's a very simple, yet profitable business model for banks. Borrow at 0.2%, lend at 2%. Pocket the difference. There's substantial profits to be made here.
Yes, the short term picture will be ugly and bad debts will be substantial. But housing prices and mortgage defaults should be supported by 2% mortgage rates. The bad debts can probably be paid off with a year or two worth of profits. After that, the banks return to being cash generating machines.
NAB Price at posting:
$17.35 Sentiment: Buy Disclosure: Held
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