The National Australia Bank Ltd (ASX: NAB) share price was on form on Tuesday.
The banking giant’s shares pushed 1% higher to $26.92 after announcing the acquisition of Citibank’s Australian consumer business for $1.2 billion.
This means the NAB share price is now up over 17% since the start of the year.
Can the NAB share price go even higher?
One leading broker that believes the NAB share price can still run higher from here is Goldman Sachs.
In response to its acquisition announcement, this morning the broker retained its conviction buy rating and $30.34 price target on the bank’s shares.
Based on the current NAB share price, this implies potential upside of 12.7% over the next 12 months before dividends. And if you include dividends, this potential return stretches to almost 18%.
What did Goldman say?
Goldman Sachs appears to be a fan of the acquisition and expects it to help the bank close the gap on its peers.
It explained: “We see strategic merit in the transaction, which would contribute to an improvement in the returns drag NAB has suffered vs. peers from being underweight Consumer Banking and having a Consumer Bank that relatively under-earns, given a lower exposure to unsecured lending.”
Goldman also expects a better return from this acquisition compared to if NAB had used the funds to buy back shares.
“We calculate that the transaction would result in a c. 1.5% better EPS outcome than if the equivalent capital was bought back on-market,” it added.
The broker concluded: “With the transaction not expected to close until Mar-22, and still subject to various regulatory approvals, our earnings remain unchanged, particularly given the integration costs are expected to be largely taken as below-the-line adjustments. Our Buy (on CL) remains unchanged reflecting: i) good exposure to the improving volume environment, ii) consistently strong NIM management, and iii) overall financial strength (provisioning, capital, and liquidity).”
The post Is the NAB (ASX:NAB) share price in the buy zone after its Citi acquisition? appeared first on The Motley Fool Australia.
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More reading
- 5 things to watch on the ASX 200 on Tuesday
- ASX 200 flat, Suncorp surges, NAB makes Citi acquisition
- NAB (ASX:NAB) share price rises on Citi consumer business acquisition
- NAB (ASX:NAB) share price lifts despite recession warning
- ASX 200 Weekly Wrap: Blockbuster Afterpay deal turbocharges ASX to new record highs
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 Bruce Jackson.
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