After leaping to 52-week highs in March, what's next for the Westpac share price?

Westpac shares notched a number of new 52-week highs in March.

| More on:
A woman sits on sofa pondering a question.

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 set a series of fresh 52-week highs in March.

However, shares in the S&P/ASX 200 Index (ASX: XJO) bank stock began to retrace mid-month, which saw the stock finish March slightly in the red.

Westpac closed out February trading for $26.35 a share. When the closing bell sounded on 28 March, shares were changing hands for $26.10 apiece, down 1.0%.

Created with Highcharts 11.4.3Westpac Banking Corporation PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

Here's what happened over the month just past.

Westpac share price on the move

Westpac joined the other big four ASX 200 banks stocks to set new 52-week and even multi-year highs in March.

On 8 March, the Westpac share price closed at $27.70.

The rally in bank stocks was spurred by increasing optimism over pending interest rate cuts from the Reserve Bank of Australia and the US Federal Reserve.

On the domestic front, Westpac could enjoy an earnings boost if the bank opts not to pass on the RBA's full cash rate cut to its customers. Of course, we still need to wait and see just when the central bank is confident enough about the inflation outlook to begin easing its policies.

As the month progressed, the Westpac share price came under some selling pressure.

The first headwind, which hit all the ASX 200 bank stocks, came on 14 March.

That's when investors learned that Macquarie had downgraded Westpac along with National Australia Bank Ltd (ASX: NAB) and ANZ Group Holdings Ltd (ASX: ANZ) to an 'underperform' rating.

The broker already had an 'underperform' rating on Commonwealth Bank of Australia (ASX: CBA) shares.

Commenting on the rationale for the downgrade, Macquarie analyst Victor German said, "Banks are trading at peak multiples without a clear fundamental reason."

Macquarie has a $26 price target on Westpac shares, which is now 0.5% above the current price of $25.87 a share.

Now what?

Trading on a price-to-earnings (P/E) ratio of 13.4 times and a fully franked trailing dividend yield of 5.4% I think the 24% gain in the Westpac share price over the past six months is justifiable.

While I don't expect shares to retrace significantly from current levels, it's hard to see the ASX 200 bank stock delivering similar outsized gains over the next half-year.

Much of the performance is going to depend on the outlook for the Aussie and global economies.

If inflation continues to ease amid a so-called 'soft landing' for the economy, and central banks finally start to cut interest rates, the Westpac share price could well surprise to the upside.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. 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 no position in any of the stocks mentioned. 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

Shocked office worker staring at computer screen with colleagues working in the background.
Bank Shares

The ASX bank share beating CBA in 2025

Many investors might not realise this smaller bank stock is leading the pack this year. 

Read more »

man thinking about whether to invest in bitcoin
Bank Shares

Here's what needs to happen for the CBA share price to try and reach $200

What could drive the CBA share price higher?

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Bank Shares

Why now could be an opportune time to sell CBA shares

A leading expert offers his verdict on the outlook for CBA shares.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Bank Shares

The Westpac share price is a buy – UBS

The broker is optimistic on Westpac shares.

Read more »

Bank building with the word bank on it.
Bank Shares

The biggest buyers and sellers of ASX 200 bank stocks revealed

Macquarie breaks down who’s been buying and who’s been selling the ASX 200 bank stocks.

Read more »

A young woman sits with her hand to her chin staring off to the side thinking about her investments.
Resources Shares

Should I switch my ASX 200 banking stocks for ASX 200 miners before earnings season?

The ASX 200 Index is dominated by Australia's bank and materials/mining sectors, which together account for around half of the…

Read more »

A man sits in contemplation on his sofa looking at his phone as though he has just heard some serious or interesting news.
Bank Shares

Here's when Westpac says the RBA will now cut interest rates

The RBA surprised everyone by keeping rates on hold last week. So, when will the next cut happen?

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Bank Shares

This is the ASX bank stock with the largest dividend yield right now

Looking to ASX bank stocks for dividend income right now?

Read more »