The Westpac Banking Corp (ASX: WBC) share price was well and truly out of form on Monday.
The banking giant's shares sank 7.5% to $23.78 following the release of its full year results.
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Is the weakness in the Westpac share price a buying opportunity?
The team at Goldman Sachs aren't convinced the Westpac share price weakness is a buying opportunity.
So much so, this morning the broker downgraded the bank's shares to a neutral rating and cut the price target on them by 11.5% to $25.60.
While this still offers decent upside of 7.5% for investors, the broker sees better value on offer elsewhere.
What did the broker say?
According to the note, Goldman was very disappointed with Westpac's weak net interest margin (NIM) outlook and its expenses. It feels the latter makes it hard for the bank to achieve its $8 billion cost target by FY 2024.
This led to Goldman downgrading its earnings estimates meaningfully for the coming years.
It explained: "We revise our FY22/23/24E EPS by -6.0%/-9.1%/-9.5% driven by: i) a weaker NIM trajectory, ii) lower other operating income from asset sales and weaker markets, partly offset by iii) better performance on BDDs."
"We downgrade WBC from a Buy to a Neutral highlighting the following key drivers: i) the significant reset in the margin at the 2H21 result provides a weak platform for revenue growth in FY22E; ii) with expenses disappointing in 2H21, we believe the potential for WBC to reach its FY24 cost target of A$8.0 bn should be more heavily discounted than previously was the case and we note that our like-for-like FY24E cost forecast is c. A$8.6 bn; iii) the benefits to non-interest income from increased economic activity are set to be offset by a loss of income from divestments, and iv) our revised TP offers only 7.5% upside," the broker concluded.
