Why the NAB (ASX:NAB) share price is closing in on a 52-week high

This banking giant is having a good day…

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The National Australia Bank Ltd (ASX: NAB) share price is on form again on Wednesday.

In afternoon trade, the banking giant's shares are up over 1% to $27.30.

This means the NAB share price is now trading within a whisker of its 52-week high of $27.84.

Why is the NAB share price pushing higher?

Today's gain by the NAB share price appears to have been driven by the release of a strong full year result by rival Commonwealth Bank of Australia (ASX: CBA) this morning, which has given investor sentiment in the banking sector a boost.

In case you missed it, Australia's largest bank reported cash earnings growth of 19.8% to $8,653 million. This was stronger than expected, with the analyst consensus estimate at $8,464 million.

Also catching the eye of investors was Commonwealth Bank's decision to return $6 billion to shareholders via a share buyback. This was significantly higher than what the market was expecting.

What else has been driving its shares higher?

Also giving the NAB share price a boost this week was an announcement on Monday.

That announcement reveals that the bank has signed an agreement to purchase Citigroup's Australian consumer business.

The proposed acquisition includes a home lending portfolio, unsecured lending business, retail deposits business, and private wealth management business. The deal will add deposits of $9 billion and lending assets of approximately $12.2 billion. The latter comprises residential mortgages of approximately $7.9 billion and unsecured lending of approximately $4.3 billion.

Goldman Sachs was positive on the deal. In response, the broker held firm with its conviction buy rating and $30.34 price target on its shares. Based on the current NAB share price, this implies potential upside of 9% before dividends.

Goldman said: "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. 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."

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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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