Shares in National Australia Bank Ltd (ASX: NAB) are rangebound from the open today and are trading 0.9% down at $27.66.
The NAB share price chart has been on a wave-like journey these past 3 months, trading as high as $30.15 and as low as $27.13.
Still, NAB shares are up almost 12% in the last 12 months, even though the new year has erased a good chunk of its 2021 gains.
Nevertheless, the team at JP Morgan are constructive on the NAB share price. They note that NAB deserves an overweighting in any ASX shares investor's portfolio.
Here's what the investment bank had to say about NAB in a recent note.
Stronger revenue growth prospects versus ASX peers
Analysts at JP Morgan are bullish on NAB shares due to a number of factors in the bank's earnings profile.
Firstly, the broker reckons NAB is well-positioned to deliver stronger-than-peer revenue growth. Hence, this is "more than offsetting uncertainty on potential enforcement action from AUSTRAC on AML".
The company notes that NAB's "stronger revenue profile" reflects the bank's small business banking segment. This, it reckons, should insulate NAB from return on equity (ROE) pressures in retail banking.
Not only that, but the bank's customer metrics are "very sound with strategic NPS showing strong improvement in recent periods". The broker reckons this is a bullish signal.
Even when factoring in foreseeable headwinds from NAB's AML investments, JP Morgan still sees the bank's pre-provision profit growth outpacing the other banking majors.
It forecasts a net interest income of $14.37 billion in FY22, growing to $14.7 billion in FY23, and $15.41 billion in FY24.
This should carry through to total operating revenues of $17.72 billion in FY22, $18.2 billion in FY23, and $19 billion in FY24.
JP Morgan also expects NAB to pay dividends of $1.40 per share this year and $1.50 and $1.59 in subsequent periods.
Importantly, the broker also sees NAB holding its net interest margin (NIM) at 1.6% over the coming 3 years. This contrasts with the consensus view that the entire banking sector will see ongoing compression to NIMs in years to come.
Instead, JP Morgan sees the bank's NIM declining by 10 basis points from 1.7% last year to 1.6% in FY22. It expects the NIM to hold the line at this level into FY24.
What's the outlook for the NAB share price?
The analysts have a December 2022 price target of $31.50 per share for NAB.
They say this reflects "the aggregate of the present value of the dividend stream paid to shareholders through to FY24E and the present value of a multiple of FY24E tangible book value".
"While we do think it likely that NAB will face some cost headwinds from AML investments, these are factored into our forecasts and still we see NAB's pre-provision profit growth outstripping peers," the broker concluded.
NAB share price snapshot
This year to date, the NAB share price has faltered by 5.9%.
The shares have regained support as of this week, having climbed 1.65% into the green over the past 5 trading days.
