The next couple of weeks will see the big four banks all hand in their latest report cards. Ahead of their releases, I am taking a look to see what the market is expecting from them.
On this occasion, I'm going to look at the Westpac Banking Corp (ASX: WBC) half year result.
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What is expected from Westpac in the first half?
Westpac is scheduled to release its half year results on Monday 3 May.
According to a note out of Goldman Sachs, its analysts have pencilled in cash earnings (before one-offs) of $3,400 million. This will be up 242% on the prior corresponding period.
From this, it expects the Westpac board to declare a fully franked 56 cents per share interim dividend.
What else should you look out for?
Goldman has suggested that investors keep an eye on volumes, asset quality, and expenses.
In respect to volumes, the broker is forecasting first half total lending growth of 0.1%. It advised that it will also be paying close attention on commentary around how volumes are trending and whether the bank is on track to return to peer levels.
As for asset quality, Goldman notes that Westpac reported a bad and doubtful debt benefit of $501 million during the first quarter. This was significantly better than the broker was expecting. Positively, the broker appears to be expecting further improvements in its asset quality.
It commented: "We currently forecast 1H21E BDDs/TL of -4bp from 27bp in the previous half and will be interested in hearing management commentary around whether they expect these current trends to persist."
Finally, Goldman points out that Westpac's expenses reduced by 2% during the first quarter. And while it acknowledges that management is forecasting expenses to rise slightly over the full year, Goldman is expecting first half expenses to be lower half on half.
It explained: "We are forecasting 1H21E expense growth of -1.1% hoh and note that WBC is due to announce a Cost Reset plan at the 1H21 result."
Is the Westpac share price good value?
Goldman Sachs currently has a buy rating and $26.67 price target on the bank's shares.
Based on the latest Westpac share price of $25.30, this implies potential upside of 5.4% over the next 12 months.
Though, this potential return stretches to approximately 10% when you include dividends.
