Is the NAB (ASX:NAB) share price a buy?

Young girl peeps over the top of her red piggy bank, ready to put coins in it.

Is the National Australia Bank Ltd (ASX: NAB) share price worth looking at right now? It’s currently at above $27.

Over the last month the NAB share price has fallen by 4%, though it had fallen below $27 a couple of weeks ago.

What do brokers think of NAB?

Brokers had been positive on the big four ASX banks for quite a while. NAB shares have risen by 47% over the last 12 months, showing that the market appeared to agree.

However, after the strong run, brokers are reducing their expectations for the next 12 months.

For example, a few weeks ago the broker Credit Suisse reduced its rating on the bank from a buy to hold/neutral. Credit Suisse thinks the positive direction that the bank is heading in is now reflected in the valuation.

Credit Suisse’s price target for NAB is $28.50, suggesting a slight increase over the next 12 months. Based on the broker’s numbers, the NAB share price is valued at more than 14x FY22’s estimated earnings with a forward grossed-up dividend yield of 6.9%.

However, the broker Ord Minnett still rates NAB as a buy, thinking it can increase its revenue. Interestingly, Ord Minnett thinks that NAB shares are valued at 15x FY23’s estimated earnings.

How good was the NAB result in reporting season?

NAB said that in the third quarter of FY21, it generated $1.65 billion of statutory net profit. The bank also made $1.7 billion of cash earnings. The cash earnings represented growth of 10.3% year on year.

At the time, the bank said that it was pleasing that it was seeing strong momentum across its business. In Australia, housing lending rose 2% and small and medium business lending grew by 4.3%, both outpacing the overall lending market in recent months. In New Zealand, its business also saw growth of lending of 2.7%. NAB attributed this growth to the decisions and investments it’s making, which are having a positive impact on the business and for customers.

Management said it’s focused on where and how it will grow. Growth can be an important factor that impacts the NAB share price.

NAB noted it has exited MLC Wealth and that the acquisitions of 86 400 and Citigroup’s Australian consumer business will help accelerate its growth strategy.

Citigroup acquisition

The big four bank is going to pay Citigroup a cash amount for the net assets of the consumer business, plus a premium of $250 million. It was expecting to pay approximately $1.2 billion for the business, which implies a multiple of 8x time Citigroup consumer business pro forma net profit after tax (NPAT) of $145 million for the 12 months to June 2021.

NAB said this deal will bring scale and deep expertise in unsecured lending, particularly credit cards, which it believes is still an important way for customers to make payments and manage their cashflows.

The NAB share price has risen 2% since announcing this acquisition.

The post Is the NAB (ASX:NAB) share price a buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison 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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