The Westpac Banking Corp (ASX: WBC) share price was on form on Friday.
The banking giant's shares ended the week with a 1% gain to $25.41.
This means the Westpac share price is now up 30% since the start of the year.
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Why is the Westpac share price on fire in 2021?
Investors have been buying Westpac and other banks this year due to the improving outlook for the sector.
This is thanks to the strong economic recovery from the pandemic, the easing of responsible lending rules, and the booming housing market.
These improvements have been on show for all to see this month with the release of half year and quarterly results.
In respect to Westpac, at the start of the month, the bank released its half year results and reported a statutory net profit after tax of $3,443 million. This was an increase of 189% over the prior corresponding period and 213% over the second half of FY 2020.
Its cash earnings were also strong. They came in at $3,537 million for the half, which was a 256% increase over the prior corresponding period and a 119% lift over the second half of FY 2020.
And even if you adjust for notable items from all periods, Westpac's earnings were strong. Excluding notable items, Westpac reported cash earnings of $3,819 million, up 60% year on year and 35% on the second half of FY 2020. This ultimately allowed the Westpac board to declare a fully franked interim dividend of 58 cents per share.
Also giving the Westpac share price a lift was news that it is planning to cut costs materially.
Westpac is targeting an $8 billion cost base by financial year 2024 to materially improve its efficiency. This compares to a ~$10.2 billion cost base in FY 2020.
Where next?
One leading broker that still sees a lot of value in the Westpac share price is Citi.
According to a recent note out of Citi, its analysts have a buy rating and $29.50 price target on its shares.
Based on the latest Westpac share price, this represents potential upside of 16% over the next 12 months. And if you include the dividend yield of 4.5% that it is forecasting, this potential return stretches beyond 20%.
Citi commented: "The market received WBC's 1H21 result positively, with core earnings upgrades near-term from a better than expected NIM; and over the medium term, from lower costs. WBC's target for FY24 costs of $8bn was lower than we anticipated, and management are confident and ambitious. We see many of the building blocks in place for the strategy, even if obvious sensitivities prevent their more fulsome disclosure. The premise of multi-year core earnings upgrades, layered on sector-wide asset quality improvements, leave WBC with a differentiated investment thesis. It remains our sole Buy in a sector that has rallied strongly in the COVID recovery."
