The National Australia Bank Ltd (ASX: NAB) share price has been on form in 2021 and is up almost 25% year to date.
Despite this, one leading broker believes its shares still have room to climb higher.
Who is bullish on the NAB share price?
According to a note out of Goldman Sachs from last week, its analysts have retained their conviction buy rating and $30.62 price target on the bank's shares.
Based on the current NAB share price of $28.58, this suggests that there is still 7.1% upside for investors.
And that isn't including dividends. Goldman is forecasting a fully franked $1.40 per share dividend in FY 2022. This will mean a yield of 4.9%, which stretches the total potential return to 12% over the next 12 months.
What did the broker say?
The broker's most recent note was in response to news that APRA is increasing bank loan serviceability expectations.
Positively, Goldman doesn't expect these changes to have any meaningful impact on NAB or its peers.
It commented:
Overall, we are of the view that this increased serviceability buffer should have limited impact on housing credit growth, and we remain constructive on the banks, with four of the six listed retail banks on Buy (NAB (on CL), ANZ, WBC and BOQ). We also highlight our Buy on PPM, which has been explicitly excluded from the restrictions announced today.
Why does Goldman like NAB?
Goldman has previously stated that it is bullish on the NAB share price due largely to its cost management initiatives.
It explained:
NAB's cost management initiatives, which seem further progressed relative to most of its peers, should drive productivity benefits sooner and free up investment spend to be directed more towards customer experience, as opposed to infrastructure (3Q21 update shows NAB is tracking well against this).
In addition, the broker likes NAB due to its strong position in business banking and its mortgage capability.
Goldman said:
Given NAB's position as the largest business bank and investment in its mortgage capability, we believe it is strongly positioned to benefit from the current recovery in both housing and commercial volumes (3Q21 update showed continued volume momentum).
Finally, it also likes NAB due to the way it "continues to effectively manage the balance between volumes and margins as well as any peer."
Overall, the broker feels this makes the NAB share price good value at the current level.
