The NAB (ASX:NAB) share price has gained 10% in the last 6 months

It has been a great six months for this banking giant…

| More on:
happy woman throws arms in the air

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The National Australia Bank Ltd (ASX: NAB) share price has been a strong performer over the last six months.

Since this time in February, the banking giant's shares have risen 10%.

This means the NAB share price is now up 20% since the start of the year.

Why is the NAB share price up 10% in six months?

There have been a few catalysts for the strong gain by the NAB share price over the last six months.

One of those has been its much-improved performance in FY 2021. This led to the bank reporting a strong half year result and then an equally strong third quarter update earlier this month.

In respect to the latter, for the three months ended 30 June, NAB revealed an unaudited statutory net profit of $1.65 billion and unaudited cash earnings of $1.70 billion.

Although this was modestly ahead of the average quarterly profit and cash earnings that it achieved during the first half of the financial year, it exceeded the market's expectations.

In response to the release, Goldman Sachs revealed that NAB was trading well-ahead of its second half estimates.

It commented: "NAB has released its 3Q21 trading update, with unaudited cash earnings from continuing operations of A$1.70 bn, up 1% on the previous period average, run-rating 11% ahead of what is implied by our current 2H21E forecasts."

What else?

Also giving the NAB share price a boost was news that it has agreed to acquire Citigroup's Australian consumer business.

The proposed acquisition includes a home lending portfolio, unsecured lending business, retail deposits business, and private wealth management business. It will add deposits of $9 billion and lending assets of approximately $12.2 billion. The latter comprises residential mortgages of approximately $7.9 billion and unsecured lending of approximately $4.3 billion.

Goldman was also pleased with this and sees the acquisition as a good way to deploy its excess capital.

The broker 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. 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."

Is it too late to invest?

As you might have guessed from Goldman Sachs' positive comments, it still sees value in the NAB share price.

Goldman recently retained its conviction buy rating and lifted its price target to $30.62. Based on the current NAB share price of $27.64, this implies potential upside of ~11% over the next 12 months before dividends. Including dividends, the potential return stretches to approximately 16%.

This could mean NAB's share price gains are still not over in 2021.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Bank Shares

A corporate female wearing glasses looks intently at a virtual reality screen with shapes and lights representing Block shares going up today
Bank Shares

Are Westpac shares a buy following the bank's big tech update?

Is now a good time to buy the banking giant's shares? Let's find out.

Read more »

Different Australian dollar notes in the palm of two hands, symbolising dividends.
Bank Shares

Own CBA shares? It's payday for you!

A dividend is heading to CBA shareholders’ bank accounts.

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Bank Shares

Are CBA shares really worth $120?

It has been a good year for ASX bank shareholders.

Read more »

a group of people sit around a computer in an office environment.
Bank Shares

Westpac shares push higher on $9.8b technology simplification plan

Westpac plans to spend big on technology to close the gap on its rivals.

Read more »

A worried woman looks at her phone and laptop, seeking ways to tighten her belt against inflation.
Economy

NAB boss issues dire prediction for Aussie economy

NAB’s CEO has issued a stark warning on the outlook for Australia’s economic growth.

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Bank Shares

Own CBA shares? Here's the tech stock the banking giant just invested in

CBA has made an interesting investment. Here's what you need to know.

Read more »

A woman gives two fist pumps with a big smile as she learns of her windfall, sitting at her desk.
Bank Shares

ANZ shares charge higher on $57.5 million class action settlement news

ANZ shares have continued their positive run on Monday.

Read more »

Two people comparing and analysing material.
Bank Shares

Better buy: CBA or Westpac stock?

Which ASX bank share is a better buy?

Read more »