By all accounts, it's been a good year for ASX 200 shares overall. But it's been a great year for ASX bank shares like Westpac Banking Corp (ASX: WBC).
Since the beginning of January, the S&P/ASX 200 Index (ASX: XJO) has gained a rosy 10.6% or so, an average return for a year if things hold until January 2025.
But compared to the returns of ASX 200 bank stocks like Westpac, the broader index looks fairly tame. To illustrate, Westpac shares have enjoyed a return of just over 44% over the same period.
Yep, Westpac shares began 2024 at $23.08 each. But those same shares are today worth $33.24. Take a look at Westpac's performance compared to the ASX 200 index below:
Of course, it's not just Westpac. All four of the major ASX 200 banks have enjoyed double-digit gains this year. Commonwealth Bank of Australia (ASX: CBA) has gained more than 39%. National Australia Group Ltd (ASX: NAB) has been a little more muted, 'only' up 27.2%. ANZ Group Holdings Ltd (ASX: ANZ) has risen by 20.5%.
But Westpac shares take out the crown with that 44% vault higher.
This gain would have been very welcome indeed by shareholders. But what about the investors who have been sitting on the sidelines and wistfully watching these gains?
Well, fortunately for those folks, the good times aren't over. At least, that's the view of one ASX broker.
Image source: Getty Images
ASX broker gives Westpac shares a buy rating
As reported in the Australian Financial Review (AFR) today, ASX broker UBS has upgraded its position on Westpac shares. The broker had previously rated Westpac shares as 'neutral', but has revised this rating to 'buy'.
UBS head of Australian banks research John Storey justified this change thus:
The disparity between valuation [high] and expected returns [low] remains wide, based on our analysis; and in our opinion, UBS fair value for the banks is around 10.2 per cent lower than current prices…
Expectations for 2025 are not much better … however, the broader reputation of Aussie banks as predictable and stable remains in place. With the current 'animal spirits' and flow-driven momentum behind the banks, our preferred way to gain exposure to the sector is via Westpac.
So… not exactly a ringing endorsement of Westpac shares' current pricing, one could argue. But an endorsement nonetheless.
No doubt, Westpac investors and those looking to buy the stock will be glad to hear this view. But let's see what happens with this ASX 200 bank in 2025.
At the current Westpac share price, this blue chip share is trading on a dividend yield of 4.54%.
