Shares in National Australia Bank Ltd (ASX: NAB) are walking lower today, currently trading 2.3% in the red at $28.22.
NAB shares have taken a beating over the past month in line with the wider ASX banking sector, as the global financial system is turned on its head in response to conflict in Europe.
As such, the NAB share price has fallen sharply from its peak of $30.85 in mid-February – also its 52-week high.
Is NAB a buy in 2022?
According to analysts at investment bank JP Morgan, NAB is absolutely a buy for 2022. The broker is overweight on NAB shares and sees a respective amount of upside for the remainder of this year.
In fact, NAB is JP Morgan's top pick among the banking majors for this year.
"We have an overweight recommendation on NAB reflecting stronger-than-peer revenue growth prospects, likely sound cost control, and ongoing capital management," the firm said in a recent note.
The stronger revenue profile reflects NAB's tilt towards small business banking, which should insulate it from ROE [return on equity] pressures in retail banking, as well as strong execution in its market leading SME franchise where it continues to take market share.
JP Morgan analysts also reckon NAB is well positioned to benefit from any increase to interest rates, calling this "leverage to rates" a net positive to net interest income (NII).
Not only that, on the customer level NAB is looking strong, it says, particularly when examining trends on individual metrics.
"Customer metrics are very sound with strategic NPS showing strong improvement in recent periods," the broker said.
The bank's Q1 FY22 results were also a standout for analysts at the firm, particularly at the net interest margin (NIM) level – a headwind that most analysts are baking in for ASX banks to face in 2022.
…underlying NIM performance which at negative 2 basis points half on half was well ahead of ANZ at minus 4 basis points and Westpac's negative 10 basis points in the quarter, as well as CBA's negative 9 basis points in the December half.
What made the margin performance more compelling was it came alongside strong loan growth of 3% quarter on quarter.
Whilst NAB could potentially "walk away" from its cost targets for FY22-24, this shouldn't be an issue for shareholders, the broker says. And NAB should avoid "short-termism" in its forecasts anyways.
"While costs may rise from here on volume-driven expenses we are comfortable with management planning for the long term and see a strong case for consistent above-peer earnings growth which we think justifies a re-rating," analysts remarked.
While we think it possible that NAB walks away from its cost targets, this is already factored into our forecasts and still we see NAB's pre-provision profit growth outstripping peers.
JP Morgan values NAB at $33.50 per share. This suggests an upside potential of 20% for investors to sink their teeth into this year, should the broker's thesis come to life.
NAB share price snapshot
In the last 12 months the NAB share price has held gains, up 7%. This year to date it has struggled, however, and is down 3% since trading recommenced on 4 January.
During the past month of trading shares have gained 1%, but NAB is still trailing the broad indexes so far in 2022.
