Should I buy NAB shares after the ASX 200 bank's latest update?

Is this banking giant a buy after its first quarter update. Here's what Goldman Sachs thinks…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • NAB released its first quarter update on Thursday
  • Goldman Sachs was impressed with its performance
  • It believes the bank's shares could have major upside potential

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.

A young investor working on his ASX shares portfolio on his laptop.

Image source: Getty Images

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.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Broker Notes

A woman in a red dress holding up a red graph.
Broker Notes

2 ASX shares tipped by brokers to return 48% to 82%

These very different companies are both looking cheap, the analysts say.

Read more »

Hand flipping wooden cube block to change between up and down with percentage sign symbol next to it.
Broker Notes

Buy, hold, sell: Pro Medicus, Fortescue, CBA shares

Experts reveal new ratings on 3 ASX 200 sector heavyweights as earnings season continues.

Read more »

A mechanic wipes his forehead under a car with a tool in his hand and looking at car parts.
Broker Notes

Bell Potter says this ASX small cap could almost double in value

This auto repairer is looking cheap.

Read more »

Old man working on his laptop at a cafe.
Broker Notes

Buy, hold, sell: CSL, BHP, Westpac shares

Let's start the new week with some fresh ratings from the experts. 

Read more »

I young woman takes a bite out of a burrito n the street outside a Mexican fast-food establishment.
Broker Notes

Are Inghams and GYG shares a buy, hold or sell following earnings results

Is there any upside for these ASX shares?

Read more »

Worried man watching his smartphone.
Broker Notes

Experts name CBA and these ASX shares as sells today

Let's see why they are bearish on these popular names.

Read more »

Red buy button on an Apple keyboard with a finger on it.
Broker Notes

Up 109%! 3 reasons this ASX All Ords lithium stock is still a buy today

A leading expert forecasts more outperformance from this rocketing ASX lithium stock.

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »