Last week, banking giant Westpac Banking Corp (ASX: WBC) released its half-year results.
Investors didn't respond overly positively to the release, with Westpac shares losing almost 3% of their value over the week.
But one leading broker remains positive. Well, just about!
According to a note out of Morgans, its analysts have been a little shaken by the result but have seen enough to retain their add rating with a new lowered price target of $24.22.
Based on the current Westpac share price of $21.09, this implies potential upside of 15% for investors over the next 12 months.
In addition, the broker is expecting a $1.49 per share fully franked dividend in FY 2023 and then a $1.52 per share fully franked divided in FY 2024. This boosts the total potential return to approximately 22% over the next 12 months.
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What did the broker say about Westpac shares?
While the broker was pleased with the bank's earnings, it was disappointed with a couple of items. It explains:
WBC delivered solid 1H23 earnings growth, a lift in ROE, a step-up in DPS, and finished the period with a strong capital and liquidity position. The NIM leverage and stepping away from the FY24 cost target were the disappointments.
Nevertheless, Morgans sees enough value in Westpac shares to overlook this. It said:
Potential 12 month TSR at current prices is c.18% [now 22%] so still justifies an ADD. However, our conviction has waned given some of the potential upside to ROE that we had been targeting has either fallen away (eg. cost target) or been proven (eg. CET1 ratio increase). Positives are the relatively low risk asset and funding mix and undemanding valuation. Concerns are the ability to continue to deliver transformation and grow its loan book at value accretive rates.
