Are you wondering whether the Westpac Banking Corp (ASX: WBC) share price is good value?
Well, with the banking giant's shares down almost 14% from their 52-week high, you're certainly not alone if you are.
But what are analysts saying about Australia's oldest bank right now? Do they see value in its shares? Let's find out.
Is the Westpac share price good value?
A good number of brokers believe that Westpac's shares are trading at about fair value currently based on its performance and outlook.
Goldman Sachs, Macquarie, Morgan Stanley, and Citi all have the equivalent of neutral ratings on its shares at present with price targets ranging from $20.60 to $22.57. This implies anything from a 3% downside to a 7% upside.
Following Westpac's disappointing third-quarter update, Citi commented:
Post 3Q23 update, we make minor changes to cash earnings forecasts of -3%/-3%/-1% for FY23E/FY24E/FY25E. This is driven by higher opex, partially offset by better NIMs and lower bad debts. We increase our opex assumptions by 3-5% driven by higher wage inflation and increased investment into Group's technology & customer simplification agenda.
Over at Goldman Sachs, its analysts revealed that they are neutral due to concerns over its cost performance and its belief that "WBC's relative skew towards consumer lending is a relative disadvantage to peers given we are incrementally more positive on system business lending growth for the sector than housing."
Are there any bulls?
While analysts at Morgans are not overly bullish, they do see value in the Westpac share price at current levels and recently maintained their add rating with a $23.02 price target.
This implies a potential upside of 9% over the next 12 months. The broker also expects a 7% dividend yield in FY 2023 and FY 2024, boosting the total 12-month return to 16%. It said:
WBC published its Q3 trading update and regulatory capital disclosures. We have made material downgrades to our forecasts and reduced our target price by 5% to $23.02 mainly because of the unexpectedly high cost growth.
The share price performance is disappointing for existing WBC investors. However, for a new investor we think the current price offers potential returns of c.19% [now 16%] (including c.7% cash yield) even after allowing for the reduced target price.
