By Gareth Vaughan

The Bank of New Zealand's value has risen more than fivefold since National Australia Bank (NAB) bought it some 20 years ago, according to analysis by Sydney-based Deutsche Bank analysts.

The analysts - James Freeman, Andrew Triggs and James Wang - slap a valuation of A$6.219 billion (about NZ$7.81 billion) on BNZ in a sum of the parts valuation done on NAB in a report entitled What discount is justified?

In their valuation of NAB they value BNZ based on their forecast 2013 financial year cash earnings for BNZ of A$592 million (up from A$575 million in 2012) and a price to earnings (PE) ratio of 10.5 times.

NAB bought BNZ in late 1992 in a deal valued at NZ$1.48 billion with key sellers being 57.3% shareholder the Government, and 27% holder Fay, Richwhite. According to recent analysis by Milford Asset Management's Brian Gaynor, BNZ has paid NZ$5.521 billion worth of dividends to NAB since.

The National Bank, the most recent of New Zealand's major banks to change hands, was bought by ANZ from Britain's Lloyds TSB in October 2003 for A$4.915 billion (about NZ$6.2 billion at today's exchange rate). This price did, however, exclude a dividend paid to Lloyds of NZ$575 million from National Bank's retained earnings, which lifts the price to NZ$6.775 billion.

Meanwhile, Freeman, Triggs and Wang value NAB itself at A$71.519 billion, or A$30.22 per share. That's A$3.52, or 13%, ahead of yesterday afternoon's A$26.70 share price. They apply higher PE ratios to some of NAB's key Australian units than the 10.5 applied to BNZ.  Both the Australian business and personal banking units get a 12.5 PE ratio, the wholesale business gets one of 11, and wealth unit MLC gets 15.

In contrast they value NAB's struggling British banks Yorkshire and Clydesdale at just half their book value, giving a A$1.996 billion valuation.

"While sum of the parts analysis does tend to miss some of NAB's issues (funding profile, under provisioning, etc), even if we were to adjust for these factors we still see upside of 7% to the current share price. As such we see upside potential from NAB over the coming 12 months and retain our 'Buy' rating," the analysts say.

Freeman, Triggs and Wang forecast a 6.6% net dividend yield from NAB this financial year, down from 7.5% last year.

This article was first published in our email for paid subscribers. See here for more details and to subscribe.