Key points
- Analysts at investment bank Morgan Stanley upgraded its valuation on the stock to $28.50 in a note yesterday
- Morgan Stanley is bullish on the ASX banking sector in 2022
- The firm reckons that shifting interest rates will positively impact margins
- In the last 12 months, the NAB share price has climbed 20% into the green
Shares in banking giant National Australia Bank Ltd. (ASX: NAB) are tracking lower today and now trade less than 2% in the red at $28.60.
As seen in the chart below, the NAB share price has outperformed its benchmark over the past 12 months, however has turned sharply this week.
There's been nothing remarkable out of the big 4 member's camp this week to pinpoint the downside pressure. However, analysts at investment bank Morgan Stanley upgraded its valuation on the stock to $28.50 in a note yesterday.
In the research update, Morgan Stanley analyst Richard Wiles noted that ASX banking shares could outperform their benchmarks in 2022 amid the prospect of higher interest rates set to improve key margins for lenders.
Why the upgrade to the NAB share price target?
Analysts at the firm note that sooner-than and larger-than-expected rate hikes from the Reserve Bank of Australia (RBA) are a net positive for ASX banking shares in general.
This, combined with a higher fixed-rate mortgage pricing regime looks set to improve the sector's margin outlook, the broker says, which will bode in well for shares in majors such as NAB.
The outlook isn't without its inherent risks, however. Whilst the broker is optimistic on the runway for players such as NAB in 2022, it also cautions the impact of higher rates on the housing market and on credit quality.
Even still, the broker thinks the banks will benefit from these and other industry-specific tailwinds, leading to higher year on year growth schedules.
"We think mortgage growth expectations are reasonable" it said in the note, "and the major banks' total loan growth should be higher in FY 2022 than in FY 2021".
The broker raised its valuation on the NAB share price by around 3% today, however retained its 'equal weight/attractive' rating in doing so.
Meanwhile, fellow broker Macquarie reckons NAB is a buy right now and assigned a $30.50 price target to its shares in a note from last year.
Goldman Sachs, Jefferies, JP Morgan and Jarden are also bullish on NAB's share price. Each broker labels the bank as a buy, and have valuations above the $31 mark.
In fact, checking a list of analysts provided by Bloomberg Intelligence, 10 firms have NAB as a buy whereas 6 have it as a hold. The consensus price target for 2022 is $30.31, indicating a 6% upside potential at the time of writing.
NAB share price summary
In the last 12 months, the NAB share price has climbed 20% into the green. However, since starting the new year, shares have crept down and are now less than 1% in the red.
This comes after a month of trending down where shares are approximately 1% in the red, and down a further 2% in the past 5 weeks of trading.
