Shares in National Australia Bank Ltd. (ASX: NAB) are cruising higher today to now trade 4% higher at $29.46 apiece.
Investors are reeling from the release of the banking major's first quarter results today, where the outcomes was better than many were expecting.
Analysts at the various investment banks are reeling too and have updated clients on their outlook on NAB shares in 2022. Let's take a closer look.
What are analysts saying on NAB shares?
One theme that's been plaguing the ASX banking sector in 2022 is the prospect of the large banking majors and their smaller counterparts' net interest margins (NIMs) contracting heavily this year.
It's widely accepted that NIMs will contract this year across the board in ASX banks, but the question is more about who will fare the best as this happens.
Analysts at JP Morgan note that NAB is holding its NIM line better than its competitors, noting the bank's firm result of just a 5 basis points (0.05%) decrease in margin for Q1.
NAB's decision to focus on lower funding costs is also offsetting the headwinds faced by competition in the mortgage market and the loan-type mix faced by other banks.
JP Morgan explains that NAB's cash net profit after tax (NPAT) of $1.8 billion shows it running at the right cadence to meet its first half profit guidance of $3.2 billion.
"This is an outstanding revenue trajectory in the context of recent peer results and our forecasts, demonstrating a franchise that is delivering in both the mortgage and business markets" the broker remarked.
Meanwhile, analysts at Citi were also impressed by the bank's quarterly results, particularly the 12% growth in cash earnings that were 10% ahead of consensus estimates.
According to Citi analysts, NAB's quarterly results show the key differentiators that investors should consider compared to the other banks – particularly as revenue growth was 8% above the average this quarter.
"While this benefited from a rebound in markets and treasury, underlying growth was still a peer-leading 5%" Citi noted in its update to clients.
"Overall, we expect consensus upgrades likely from the better revenue result, and think the stock will be well supported given profit momentum and NIM pressures at peers" it said.
UBS analysts are also bullish on NAB and value the bank at $30.50 per share. The Swiss investment bank noted the earnings beat could lead to a flurry of analyst upgrades in response.
"In our view, NAB's Q1 trading update and operating performance is well ahead of consensus at a pre-provision operating level, so this update is likely to drive consensus earnings upgrades" the broker said.
A summary of NAB shares
In the last 12 months, NAB shares are up 17% and have gained more than 1% this year to date. They have struggled in the past month however, sliding less than 1% in the red.
At the time of writing NAB has a market capitalisation of over $92 billion and trades on a price to earnings (P/E) ratio of 14.7x.
