Westpac Banking Corp (ASX: WBC) shares have been strong performers in 2024.
Since the start of the year, the banking giant's shares have risen an impressive 18%.
Can its shares continue to rise or are they fully valued now? Let's find out what analysts are saying.
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Can Westpac shares deliver good returns?
Unfortunately, it seems that almost all brokers believe that the banking giant's shares are fully valued now.
For example, a note out of Citi on Monday reveals that its analysts have retained their sell rating and $24.75 price target on the bank's shares.
Despite Westpac being the broker's favourite big four bank, it is still predicting its shares to fall 8.5% from current levels.
Elsewhere, Macquarie currently has an underperform rating and $26.00 price target and Morgan Stanley has an underweight rating and $24.50 price target.
Why is nobody bullish?
The main reason for the bearish view on Westpac is the valuation of its shares. Together with a few niggling risks and analysts just don't see a compelling risk/reward on offer with the big four bank right now.
Analysts at Goldman Sachs summarised this. They said:
We believe that low industry-wide RWA growth and WBC's strong capital position, which even on a pro-forma basis is >12%, well above its 11.0-11.5% target ratio, underpins a sustainable payout ratio at the top of its 65-75% target range. However, against this, WBC's technology simplification plan comes with a significant degree of execution risk, given historically banks' large-scale transformation programs have struggled to stay on budget, and we are currently operating in a stickier-than-expected inflationary environment. Therefore, trading on a 12-mo forward PER of 14.5x (14.0x ex-dividend adjusted, which is one standard deviation above its 15-year historic average of 12.7x), we stay Neutral.
According to the note, the broker has a neutral rating and $24.10 price target on its shares. Based on the current Westpac share price, this implies potential downside of approximately 11% for investors over the next 12 months.
But that doesn't include dividends. Goldman is forecasting fully franked dividends of $1.65 per share in FY 2024 and then $1.50 per share in FY 2025.
As its shares have already gone ex-dividend for its 90 cents per share interim dividend for FY 2024, this means that investors will receive a $1.50 per share over the next 12 months if buying today. This comprises a 75 cents per share final dividend for FY 2024 and then a 75 cents per share interim dividend for FY 2025. This equates to a 5.5% dividend yield, reducing the total 12-month potential loss from 11% to 5.5%.
Overall, investors should be able to find better returns elsewhere without much effort.
