Westpac (ASX:WBC) share price rises after broker tips $5bn buyback

The Westpac Banking Corp (ASX: WBC) share price is back on form on Wednesday. In afternoon trade, the banking giant's …

| More on:
A woman leans forward with her hand behind her ear, as if trying to hear information.

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 Westpac Banking Corp (ASX: WBC) share price is back on form on Wednesday.

In afternoon trade, the banking giant's shares are up almost 1.5% to $25.80.

Why is the Westpac share price rising today?

Investors have been bidding the Westpac share price higher after a leading broker spoke positively about its third quarter update.

According to a note out of Goldman Sachs, its analysts have retained their buy rating and lifted their price target on bank's shares to $29.93.

Based on the current Westpac share price, this implies potential upside of 16% over the next 12 months before dividends.

Furthermore, Goldman has held firm with its dividends per share forecast of 116 cents in FY 2021 but increased its FY 2022 forecast to 128 cents and FY 2023 forecast to 141 cents. This implies yields of 4.5%, 5%, and 5.5%, respectively.

But perhaps the biggest positive is that the broker believes Westpac could announce a $5 billion off-market share buyback with its full year results later this year. This follows similar moves by its rivals.

What did the broker say?

Goldman commented: "WBC's Jun-21 (3Q21) Pillar 3 update highlighted that its asset quality and capital trends were run-rating broadly in line with our prior 2H21E expectations. That said, management's explicit commentary around its surplus capital and franking position, which will see the Board consider a return of capital, with an update at its FY21 results, does bode well for the timing of potential capital management."

"We move our FY21E/22E/23E EPS by +0.7%/+4.3%/+7.2%, driven by i) improved balance sheet momentum, ii) lower 2H21E BDDs, and iii) our assumption of an A$5bn off-market buyback in light of its surplus capital and franking, partially offset by iv) lower NIMs, and vi) higher near term expenses," it added.

Overall, the broker continues to see a lot of value in the Westpac share price at the current level. It also believes the risks are to the upside for its earnings. Especially given management's bold cost reduction targets.

Motley Fool contributor James Mickleboro owns shares of Westpac Banking Corporation. 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

Bank building with the word bank on it.
Bank Shares

The biggest buyers and sellers of ASX 200 bank stocks revealed

Macquarie breaks down who’s been buying and who’s been selling the ASX 200 bank stocks.

Read more »

A young woman sits with her hand to her chin staring off to the side thinking about her investments.
Resources Shares

Should I switch my ASX 200 banking stocks for ASX 200 miners before earnings season?

The ASX 200 Index is dominated by Australia's bank and materials/mining sectors, which together account for around half of the…

Read more »

A man sits in contemplation on his sofa looking at his phone as though he has just heard some serious or interesting news.
Bank Shares

Here's when Westpac says the RBA will now cut interest rates

The RBA surprised everyone by keeping rates on hold last week. So, when will the next cut happen?

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Bank Shares

This is the ASX bank stock with the largest dividend yield right now

Looking to ASX bank stocks for dividend income right now?

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Bank Shares

ASX banking sector: Is it time to consider a regional bank?

The big 4 banks are widely considered to be overvalued.

Read more »

A person leans over to whisper a secret to a colleague during a meeting.
Bank Shares

Here are the latest growth forecasts for the CBA share price

Can the bank continue rising? Here are some expert views.

Read more »

A businessman presents a company annual report in front of a group seated at a table
Bank Shares

Earnings season predictions: Macquarie weighs in on the big 4 banks

What are the broker's predictions?

Read more »

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 »