Are Westpac shares a buy ahead of next month's full-year results?

Could rising rates take Westpac shares higher on results day?

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Key points

  • The Westpac share price is waning on Monday as markets sell-off
  • Westpac's full-year results are now only three weeks away from release
  • Goldman Sachs thinks the bank will benefit from an increase in its net interest margin

Westpac Banking Corp (ASX: WBC) shares are dipping to the downside today amid a broad-based sell-off across ASX shares.

As we head into the afternoon, the major bank's share price is 0.51% lighter at $23.38. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is carrying a heavy 1.45% fall.

The financials sector is one of the lesser impacted corners of the market today. Though the bank-laden sector is 1% in the red, other areas of the market — such as materials — have been struck with declines of more than 2.5%.

Today, onlookers and holders of Westpac shares might now be contemplating what to do in the lead-up to the company's FY22 full-year results.

Banking on a solid result

Firstly, Westpac has 7 November earmarked as the day it will release its FY22 numbers to the public.

The information contained in this report could act as a catalyst for the Westpac share price, so investors are paying attention. As of today, that announcement is only three weeks away.

At the moment, expectations for the bank's financial accounts are relatively rosy. However, this isn't necessarily a Westpac-only phenomenon.

Instead, the improvement in sentiment likely stems from the affirmation of higher interest rates resulting in improved margins.

This affirmation was provided by Bank of Queensland Ltd (ASX: BOQ) last week upon the release of its full-year report.

Namely, the bank's net interest margin (NIM) at the end of the financial year slotted in at 1.81%, compared to its second-half average of 1.75%. As a result, analysts — such as those at Goldman Sachs — believe Westpac shares could be in for a similar boost.

As my colleague previously covered, the broker considers Westpac the best bank to benefit from rising rates. As such, the Goldman team has assigned a $27.08 price target to the company, suggesting a further ~15% upside.

Furthermore, Refinitiv Eikon data puts the bank's FY23 dividend yield estimate at 6%. For income investors, this could be an appetising offer to provide some form of an inflation hedge.

Westpac shares in the rearview

Looking across the big four banks, Westpac shares have been the best ones to hold so far this year.

In contrast to negative returns from the likes of Commonwealth Bank of Australia (ASX: CBA) and Australia and New Zealand Banking Group Ltd (ASX: ANZ), Westpac has climbed 8% into the green.

The only other big four constituent to dish out a positive return has been National Australia Bank Ltd (ASX: NAB). Though, NAB's share price has appreciated a more modest 5.6% in 2022.

Motley Fool contributor Mitchell Lawler has positions in Commonwealth Bank of Australia. 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 recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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