What is the outlook for the National Australia Bank Ltd (ASX: NAB) share price?
Over the past year, NAB shares have gone up 48%. That compares to the return of the S&P/ASX 200 Index (ASX: XJO) which has only risen by around 18%. NAB has outperformed the ASX 200 by around 30% over the last 12 months.
But that's the past. What about the future?
Broker ratings on the NAB share price
Last year, many brokers said it was worth buying NAB shares. The big four ASX bank has certainly been a performer during 2020 and the first half of 2021.
But the buy ratings are less numerous now. For example, Credit Suisse recently downgraded its rating on NAB shares from a buy to a hold.
Credit Suisse thinks NAB has turned its performance around, however it thinks the valuation now fully reflects that optimism. At the time of its rating change, the broker also noted that NAB was no longer valued at a discount compared to the other big banks like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), and Australia and New Zealand Banking Group Ltd (ASX: ANZ).
On Credit Suisse's numbers, the NAB share price is valued at under 15x FY21's estimated earnings.
Morgan Stanley is another broker that doesn't have a buy rating on NAB. The broker also noted the positive signs at NAB, but it thinks revenue isn't going to perform strongly.
The broker thinks NAB is valued at 14x FY21's estimated earnings.
However, there are a handful of analysts that have buy ratings on the big bank. For example, Ord Minnett has a buy rating with a price target of $29.50. One of the reasons for that positive outlook is the fact that things are looking up for the small business sector.
What are the bank's thoughts?
The latest update from the bank came after it announced its FY21 third quarter when it said it generated $1.7 billion in the three months – an increase of 10.3% year on year.
The NAB share price has risen by more than 5% after the release of this quarterly update.
Management described the quarter as encouraging, supported by significantly better credit impairment outcomes.
NAB said it was particularly pleasing to see the "strong momentum" across the business. In Australia, while housing lending rose 2%, small and medium enterprise (SME) lending increased by 4.3%.
NAB CEO Ross McEwan said:
We have a clear focus on where and how we will continue to grow. The exit of MLC Wealth is now complete, and the acquisitions of 86 400 and Citigroup's Australian consumer business will help accelerate our growth strategy.
We remain optimistic about the long-term outlook for Australia and New Zealand. The strong economic momentum leading into this period, ongoing government support and customers' relatively healthy starting positions give us confidence that once restrictions are eased, the economy will again bounce back.
NAB share price snapshot
After the strong run of NAB shares since the bottom of COVID-19, the big bank now has a market capitalisation of $93.4 billion according to the ASX.
