The National Australia Bank Ltd (ASX: NAB) share price has continued its slide on Thursday.
In morning trade, the banking giant's shares are down 2% to $31.01.
Why is the NAB share price falling?
Investors have been selling down the NAB share price since the release of the bank's results on Wednesday.
While this is disappointing, one leading broker sees the weakness as a buying opportunity.
According to a note out of Goldman Sachs, its analysts have retained their buy rating with an improved price target of $35.41.
Based on the current NAB share price, this suggests potential upside of over 14% for investors over the next 12 months.
And let's not forget the NAB dividend, which Goldman expects to be $1.73 per share in FY 2023. This represents a fully franked 5.6% dividend yield, increasing the total potential return to almost 20%.
What did the broker say?
While Goldman wasn't blown away with NAB's cash earnings, which fell 1.5% short of its estimates, it remains positive due partly to its margin outlook. In fact, it has boosted its earnings estimates to reflect higher than expected margins. It explained:
Our FY23/24/25E cash EPS moves by +8.6%/+1.5%/-0.2%, driven by: i) a steeper rise in NIMs in 1H23E, and ii) lower BDDs, partly offset by iii) lower other operating income. As a result, our 12-month TP moves to A$35.41, from A$34.81.
Outside this, the broker continues to believe that NAB provides "the best leverage to the thematic that domestic volume momentum will favour commercial over housing volumes over both the short- and medium-term."
It also expects that "commercial lending will be better insulated from competitive pressures particularly prevalent in mortgage lending," which bodes well for NAB given its overweight exposure to this side of the market.
In addition, the broker highlights:
NAB's cost management initiatives, which seem further progressed vs. peers, has allowed it to deliver the highest levels of productivity over the last three years, and we think this leaves it well positioned for an environment of elevated inflationary pressure (c. A$400 mn productivity savings expected in FY23).
All in all, Goldman believes this makes the NAB share price great value at the current level.
