The National Australia Bank Ltd (ASX: NAB) share price has been a strong performer this week.
Thanks to a solid half year result from rival Commonwealth Bank of Australia (ASX: CBA) and an equally solid first quarter update of its own, NAB's shares have recorded a gain of 5.5% this week.
Is it too late to buy NAB shares?
According to one leading broker, NAB's shares can still go higher from here over the remainder of 2020.
A note out of Goldman Sachs reveals that its analysts have retained their conviction buy rating and lifted the price target on NAB's shares to $30.46.
This price target implies potential upside of 12% for its shares over the next 12 months excluding dividends. And if you include the $1.66 per share fully franked dividend that it expects the bank to pay this year, this potential return stretches to almost 18%.
Why is Goldman Sachs bullish on NAB?
According to the note, the broker was pleased with its first quarter update and particularly its better than expected net interest margin.
And while its costs were higher than it forecast, it notes that management reiterated its broadly flat FY 2020 expense target.
Goldman also notes that its capital position was in line with its expectations. It also believes management's discussion around the potential for a partial hybrid conversion to ordinary shares might alleviate concerns around NAB's need to do a separate capital raising. It expects this to add 18 basis points to its CET1 ratio but have limited impact on diluted earnings per share.
The broker concluded: "We reiterate our NAB Buy (on CL) given its revenue momentum will remain superior to peers, driven by its overweight exposure to SME, which remains a relative tailwind for volumes and margins. Coupled with it being on track to deliver flat expense growth in FY20E (ex-notable items), we forecast NAB to deliver top-of-peer PPOPps growth over the next three years, which we do not believe is reflected in its 18% PPOP multiple discount to peers (14% avg.)."
