The National Australia Bank Ltd (ASX: NAB) share price took an almighty beating on Thursday.
The banking giant's shares ended the day over 6% lower at $26.72.
This leaves NAB's shares trading within throwing distance of their 52-week low.
Why was the NAB share price sold off?
Investors were hitting the sell button yesterday after the bank's half-year results fell short of expectations.
Goldman Sachs summarised what went wrong for NAB. It commented:
NAB's 1H23 cash earnings were up 17% on pcp but 4% below GSe, driven by lower-than-expected NIMs. While headline NIM was underwhelming, we note that a driver of this was a reclassification of net interest income into trading income.
Is this a buying opportunity?
While Goldman Sachs clearly wasn't impressed with the bank's results, it does still see a lot of value in the NAB share price.
As a result, the broker has retained its buy rating on its shares with a reduced price target of $30.69. This implies potential upside of almost 15% for investors over the next 12 months.
In addition, Goldman is now forecasting a $1.66 per share fully franked dividend in FY 2023. This represents a 6.2% yield, which boosts the total return on offer with NAB shares to 21%.
What did the broker say?
Goldman remains positive on the NAB share price for five key reasons. It explains:
Our Buy rating on NAB is predicated on: 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 and its investments continue to yield benefits (A$400 mn expected in FY23E), which we think leaves it well positioned for an environment of elevated inflationary pressure, iii) NAB's strong capital surplus position (A$3.1 bn of surplus capital above the top-end of its target CET1 range of 11.0-11.5%) allows flexibility for further buy-backs, v) NAB returns improvements vs. peers is not reflected in valuations (details within), and vi) our revised TP offers c. 21% TSR.
