National Australia Bank Ltd (ASX: NAB) shares are on course to end the week in the red.
In afternoon trade, the banking giant's shares are down almost 2.5% to $29.78.
This means that its shares are down almost 6% since this time last week.
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Should you buy NAB shares?
According to analysts at Goldman Sachs, they believe that investors should be loading up on NAB shares following the release of the bank's first quarter update.
In response to the stronger than expected update, the broker commented:
NAB has released its 1Q23 trading update, with unaudited cash earnings from continuing operations of A$2.15 bn, up 18% on the previous period average, run-rating 3% above what was implied by our previous 1H23E forecasts. The better than expected performance was driven by stronger revenues (Markets) and lower BDDs, partially offset by higher expenses. NAB's CET1 ratio of 11.3% was running in-line with our forecasts.
In light of this, the broker has reiterated its buy rating with a $35.42 price target. Based on where NAB shares are currently trading, this implies potential upside of 19% over the next 12 months.
Why is Goldman bullish?
Goldman explained that it is bullish on NAB due largely to its exposure to commercial lending, which it expects to fare better than home lending in the current environment.
The broker believes this will be supportive of further net interest margin (NIM) strength. It said:
We reiterate our Buy on NAB given: i) we see volume momentum over the next 12 months as favouring commercial volumes over housing volumes and we believe NAB provides the best exposure to this thematic, ii) NAB has delivered the highest levels of productivity over the last three years, which we think leaves it well positioned for an environment of elevated inflationary pressure, iii) NAB's 1Q23 operating trends seem consistent with management commentary at its FY22 result, particularly with regard to NIMs, which we view as a positive given the commentary CBA made at its 1H23 result, which suggested NIMs have peaked. Reiterate Buy.
