The National Australia Bank Ltd (ASX: NAB) share price was on form on Monday.
The banking giant's shares pushed 1% higher to $26.92 after announcing the acquisition of Citibank's Australian consumer business for $1.2 billion.
This means the NAB share price is now up over 17% since the start of the year.
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Can the NAB share price go even higher?
One leading broker that believes the NAB share price can still run higher from here is Goldman Sachs.
In response to its acquisition announcement, this morning the broker retained its conviction buy rating and $30.34 price target on the bank's shares.
Based on the current NAB share price, this implies potential upside of 12.7% over the next 12 months before dividends. And if you include dividends, this potential return stretches to almost 18%.
What did Goldman say?
Goldman Sachs appears to be a fan of the acquisition and expects it to help the bank close the gap on its peers.
It explained: "We see strategic merit in the transaction, which would contribute to an improvement in the returns drag NAB has suffered vs. peers from being underweight Consumer Banking and having a Consumer Bank that relatively under-earns, given a lower exposure to unsecured lending."
Goldman also expects a better return from this acquisition compared to if NAB had used the funds to buy back shares.
"We calculate that the transaction would result in a c. 1.5% better EPS outcome than if the equivalent capital was bought back on-market," it added.
The broker concluded: "With the transaction not expected to close until Mar-22, and still subject to various regulatory approvals, our earnings remain unchanged, particularly given the integration costs are expected to be largely taken as below-the-line adjustments. Our Buy (on CL) remains unchanged reflecting: i) good exposure to the improving volume environment, ii) consistently strong NIM management, and iii) overall financial strength (provisioning, capital, and liquidity)."
