On Tuesday, the National Australia Bank Ltd (ASX: NAB) share price came under pressure.
The banking giant's shares ended the day 3% lower at $29.81 after its third quarter update disappointed.
Is the NAB share price weakness a buying opportunity?
The good news is that the team at Goldman Sachs believe the NAB share price offers plenty of value for investors.
According to a note this morning, the broker has retained its buy rating and $34.37 price target on the bank's shares.
Based on the current NAB share price, this implies potential upside of 15.3% for investors over the next 12 months.
In addition, the broker is forecasting a $1.50 per share dividend in FY 2022 and a $1.69 per share dividend in FY 2023. This represents fully franked yields of 5% and 5.7%, respectively, for investors.
What did the broker say?
Goldman Sachs was reasonably pleased with NAB's quarterly update. And while it notes that the bank's third quarter performance is run-rating a touch behind its full year expectations, it believes that recent cash rate rises will boost its fourth quarter performance and bring the bank back in line with its estimates.
It commented:
NAB has released its 3Q22 trading update, with unaudited cash earnings from continuing operations of A$1.80 bn (includes the impacts of the Citi acquisition), up 3% on the previous period average, run-rating 2% below what is implied by our current 2H22E forecasts.
The lower than expected performance was driven by weaker revenues partially offset by lower expenses and BDDs. PPOP was also up 3% on the previous period average, and 2% behind GSe.
While the operating metrics appear weaker than what is implied by our 2H22E forecasts, we are not surprised by this given the back-end nature of the cash rate rises in 3Q, which will therefore particularly benefit 4Q. We would therefore see the operating performance of today's update as broadly consistent with our current FY22E forecasts.
