The National Australia Bank Ltd (ASX: NAB) share price is trading lower on Friday.
In morning trade, the banking giant's shares are down 1% to $31.90.
This is a relatively positive outcome given that the ASX 200 index is currently down a sizeable 2.2%.
This appears to have been driven by a positive response to NAB's half-year results from a leading broker.
What did the broker say about the bank's results?
According to a note out of Goldman Sachs, its analysts were reasonably pleased with NAB's half-year results. Although, it acknowledges that the bank's earnings growth was a touch slower than it was forecasting, it was pleased with its net interest margin (NIM).
The broker commented:
NAB's 1H22 cash earnings grew by 4% on pcp to A$3,480 mn, 2% below GSe, driven by lower-than-expected Trading non-interest income and higher operating expenses. The interim DPS of A73¢ was slightly above GSe (A72¢), reflecting a payout ratio of 68%.
NAB's 1H22 NIM was down 6 bp hoh to 1.63%, which was 2 bp above our expectations (GSe 1.61%). NAB expects a moderate positive NIM impact from the rising rate environment on replicating portfolios in 2H22.
Is the NAB share price good value?
After reviewing its half-year results, Goldman Sachs believes the NAB share price is good value at the current level.
As a result, the broker has retained its conviction buy rating and lifted its price target to $34.17.
Based on the current NAB share price, this implies a potential return of 7.1% for investors over the next 12 months before dividends and 12% to 13% including dividends.
Why is Goldman bullish?
Goldman is bullish on NAB due to its balance sheet mix. It feels this gives NAB the best exposure to the domestic system growth.
In addition, the broker is positive on NAB's NIM outlook, strong franchise performance, and feels the NAB share price is attractively priced.
The broker explained:
We reiterate our Buy rating (on CL) on NAB and it remains our preferred sector exposure given: i) NAB's balance sheet mix provides the best exposure to the domestic system growth we foresee over the next 12-18 months, which should favour commercial lending over mortgage lending, ii) NAB's franchise is performing strongly, growing at or above system growth in most segments, iii) NAB's disclosure on NIM leverage to higher rates is even more optimistic than our own assessment, iv) while valuations are no longer cheap, our revised TP continues to offer c. 13% TSR. We therefore reiterate our Buy recommendation (on CL).
