The Westpac share price smashed the other ASX 200 banks in 2022. What now?

Can Westpac beat the market again in 2023…

| More on:
Bank building with the word bank on it.

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 was a strong performer in 2022.

Australia's oldest bank's shares rose a sizeable 9.4% during the 12 months.

This compares favourably to the S&P/ASX 200 Index (ASX: XJO) and its 5.5% decline during the same period.

It also means that it was the best-performing big four bank in 2022.

Why did the Westpac share price smash the market?

Investors were bidding the Westpac share price higher last year thanks to its much-improved outlook.

This was driven by the Reserve Bank of Australia increasing the cash rate to combat inflation, which has boosted bank margins materially.

For example, when Westpac released its FY 2022 results in November, it revealed a 5 basis points increase in its net interest margin (NIM) during the second half to 1.90%.

However, that's only the beginning of its NIM improvements, according to many analysts. In fact, Goldman Sachs highlights that "management's guidance on its FY23 NIM trajectory was better than we had previously anticipated." As a result, the broker now expects a NIM of 2.05% in FY 2023.

What's 2023 looking like for its shares?

While a lot can happen in the space of 12 months, as things stand, Goldman Sachs believes it is onwards and upwards for the Westpac share price.

So much so, the broker has a conviction buy rating and $27.60 price target on the bank's shares.

Its analysts believe Westpac and rival National Australia Bank Ltd (ASX: NAB) can provide double digit returns each year over the next three years. The broker explained:

The major Australian banks have been in the midst of an EPS upgrade cycle, with 12-month forward EPS having increased by an average of 21% p.a. over the last two years. However, the outlook is now less optimistic, with 12-month forward EPS now only representing a c. 4% p.a. tailwind to share prices over the next three years. Despite this, the outlook for our two Buy stocks, WBC (on CL) and NAB, is better, and we highlight why we think double digit total shareholder returns remains achievable over the next three years.

Motley Fool contributor James Mickleboro has positions in Westpac Banking. 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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

Man smiling at a laptop because of a rising share price.
Bank Shares

2 strong ASX bank shares to consider before year-end

I think these ASX bank shares could be compelling opportunities in the sector.

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Bank Shares

Is this a good time to buy NAB shares?

Should investors bank on good returns from here?

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Bank Shares

CBA shares: Overvalued or still a buy?

CBA shareholders have seen a lot of gains in 2024. Is it too late to buy?

Read more »

Woman and man calculating a dividend yield.
Bank Shares

What's the outlook for Bank of Queensland shares in 2025?

Here’s what experts predict for BOQ next year.

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Bank Shares

Why ANZ shares are making big news today

ANZ's CEO is handing back millions as scrutiny grows.

Read more »

Nervous customer in discussions at a bank.
Bank Shares

Why this expert says it's time to sell NAB shares

Are NAB shares a sell heading into 2025?

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

'Too high too rapidly': Why CBA shares are a sell

Should you sell your CBA shares today?

Read more »

Happy young woman saving money in a piggy bank.
Bank Shares

Why today is a big day for NAB shares

It’s a big day for NAB shareholders on Wednesday.

Read more »