Broker tips major upside for the Westpac share price

Young investor sits at desk looking happy after discovering Westpac's dividend reinvestment plan

Young investor sits at desk looking happy after discovering Westpac's dividend reinvestment plan

The Westpac Banking Corp (ASX: WBC) share price is trading lower with the market on Friday.

In late morning trade, the banking giant’s shares are down 1.5% to $21.39.

Is the Westpac share price in the buy zone?

While Australia’s oldest bank isn’t getting a lot of love from investors at the moment, one leading broker believes now could be the time to pounce.

According to a recent note out of Goldman Sachs, its analysts have put a conviction buy rating and $26.55 price target on the bank’s shares.

Based on the current Westpac share price, this implies potential upside of 24% for investors over the next 12 months.

This stretches to approximately 30% if you include the 5.7% fully franked dividend yield the broker is expecting in FY 2022.

Why is Westpac a buy?

Goldman believes that the Westpac share price offers the best risk/reward for investors at present. Particularly given its strong exposure to rising interest rates and its cost reduction plans.

The broker commented:

We continue to see WBC as our preferred exposure to the A&NZ Financials reflecting: i) its strong leverage to rising rates, ii) while we think its A$8 bn FY24 cost target will now be unachievable, we still forecast a 7% reduction in underlying expenses, iii) its recent market update highlighted that the business is still investing effectively in its franchise, and iv) our 12-mo TP implies a 23% [now ~30%] TSR, and we note the stock is trading at a 20% discount to peers, versus the historic average discount of 2%.

All in all, this could make Westpac one to consider if you’re looking for exposure to the banking sector as interest rates rise.

The post Broker tips major upside for the Westpac share price appeared first on The Motley Fool Australia.

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More reading

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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 recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia

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