The NAB (ASX:NAB) share price has gained 10% in the last 6 months

It has been a great six months for this banking giant…

| More on:
happy woman throws arms in the air

Image source: Getty Images

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

The National Australia Bank Ltd (ASX: NAB) share price has been a strong performer over the last six months.

Since this time in February, the banking giant's shares have risen 10%.

This means the NAB share price is now up 20% since the start of the year.

Why is the NAB share price up 10% in six months?

There have been a few catalysts for the strong gain by the NAB share price over the last six months.

One of those has been its much-improved performance in FY 2021. This led to the bank reporting a strong half year result and then an equally strong third quarter update earlier this month.

In respect to the latter, for the three months ended 30 June, NAB revealed an unaudited statutory net profit of $1.65 billion and unaudited cash earnings of $1.70 billion.

Although this was modestly ahead of the average quarterly profit and cash earnings that it achieved during the first half of the financial year, it exceeded the market's expectations.

In response to the release, Goldman Sachs revealed that NAB was trading well-ahead of its second half estimates.

It commented: "NAB has released its 3Q21 trading update, with unaudited cash earnings from continuing operations of A$1.70 bn, up 1% on the previous period average, run-rating 11% ahead of what is implied by our current 2H21E forecasts."

What else?

Also giving the NAB share price a boost was news that it has agreed to acquire Citigroup's Australian consumer business.

The proposed acquisition includes a home lending portfolio, unsecured lending business, retail deposits business, and private wealth management business. It 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 was also pleased with this and sees the acquisition as a good way to deploy its excess capital.

The broker 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. 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."

Is it too late to invest?

As you might have guessed from Goldman Sachs' positive comments, it still sees value in the NAB share price.

Goldman recently retained its conviction buy rating and lifted its price target to $30.62. Based on the current NAB share price of $27.64, this implies potential upside of ~11% over the next 12 months before dividends. Including dividends, the potential return stretches to approximately 16%.

This could mean NAB's share price gains are still not over in 2021.

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.

More on Bank Shares

Contented looking man leans back in his chair at his desk and smiles.
Bank Shares

Major CBA investor reveals why he's all in

This investor described one major reason driving his investment in CBA shares.

Read more »

Young investor sits at desk looking happy after discovering Westpac's dividend reinvestment plan
Bank Shares

Invested $10,000 in Westpac shares 2 years ago? Guess how much you've already banked!

Atop their regular dividend payments, Westpac shares have enjoyed a strong two-year run.

Read more »

Woman calculating dividends on calculator and working on a laptop.
Bank Shares

Buying CBA stock today? Here's the dividend yield you'll get

CBA's yield right now might surprise you.

Read more »

A financial expert or broker looks worried as he checks out a graph showing market volatility.
Bank Shares

How much would the ASX 200 fall if CBA shares returned to 'fair value'?

CBA shares account for 12% of the ASX 200.

Read more »

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
Dividend Investing

How are these passive income investors earning a 7.5% dividend yield on their surging CBA shares?

CBA shares are proving more lucrative for some passive income investors than others.

Read more »

A woman in a bright yellow jumper looks happily at her yellow piggy bank.
Bank Shares

$10,000 invested in CBA shares in FY25 is now

Let's see whether it was a successful 12 months for bank investors in the last financial year.

Read more »

Woman with spyglass looking toward ocean at sunset.
Bank Shares

What could happen to the big 4 banks in FY26?

What’s in store for the big four banks over the next 12 months?

Read more »

Bank building in a financial district.
Bank Shares

Which is the only ASX 200 bank stock Macquarie expects to outperform in FY 2026?

Macquarie forecasts a tough year ahead for the ASX 200 banks, with only one expected to outperform.

Read more »