The Westpac share price soared 17% in October, what’s next?

The Westpac Banking Corp (ASX: WBC) share price had a stellar month in October.

Westpac shares soared 16.8% from $20.64 at market close on 30 September to $24.11 at the end of October.

Let’s take a look at what weighed on the Westpac share price in October.

How did the month play out?

Westpac was not the only bank to rise in October. National Australia Bank Ltd (ASX: NAB) shares leapt 12.5% during the month, while Commonwealth Bank of Australia (ASX: CBA) shares jumped 15.4% and Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares lifted 12.1%.

ASX bank shares including Westpac appeared to perform well amid strong market sentiment in the financial sector. Interest rate rises also may have had an impact on the Westpac share price. The Reserve Bank of Australia lifted the official cash rate by 25 basis points to 2.6% in October. This benefits banks because interest rate rises improve margins on loans.

In news on 24 October, Westpac advised its net profit and cash earnings in the second half of 2022 will take a $1.3 billion hit. This includes a loss of $1.1 billion on the Westpac Life Insurance Limited sale. However, Westpac is still tipped to report a $5.4 billion profit in 2022.

Also in October, Westpac revealed it is in “preliminary discussions” with Tyro Payments Ltd (ASX: TYR) to acquire 100% of its share capital. However, the bank clarified “there is no certainty that any transaction will result”. Westpac shares pushed 2.35% higher on 18 October, the day of the announcement.

Looking ahead, Citi analysts have recently shed light on Westpac’s potential takeover of Tyro. Citi is positive on the transaction, but believes it may be hard to pull off. Citi said:

The potential transaction would strengthen WBC’s small business proposition, and move it ahead of CBA in card-present segment share. Consequently, WBC’s existing scale in merchant acquiring would allow for likely synergies, but we think such a transaction would still prove difficult to execute.

TYR’s major shareholder is linked to another interested consortium, while its [Tyro’s] exclusive arrangement with current and referred BEN [Bendigo and Adelaide Bank] customers presents another unknown.

Citi has a buy rating on the Westpac share price with a $30 price target. Citi is also tipping a $1.60 per share fully-franked dividend in the 2023 financial year.

The Reserve Bank of Australia (RBA) hiked interest rates by a further 0.25% on Tuesday, taking the official cash rate to 2.85%. The RBA “expects to increase rates further over the period ahead”.

Westpac is due to report its full-year 2022 results on Monday 7 November.

Westpac share price snapshot

The Westpac share price has lost nearly 6% in the past year, while it has soared nearly 15% year to date.

For perspective, the S&P/ASX 200 Index (ASX: XJO) has descended 5% in the last year.

Westpac has a market capitalisation of about $85.7 billion based on the current share price.

The post The Westpac share price soared 17% in October, what’s next? appeared first on The Motley Fool Australia.

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More reading

• Up 14% in a month, why the ANZ share price can keep delivering: Citi
• 5 things to watch on the ASX 200 on Tuesday
• Here’s how the NAB share price has fared in October
• Buy Westpac shares now for EPS and dividend growth: experts
• These ASX dividend shares have big yields

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tyro Payments. The Motley Fool Australia has positions in and has recommended Bendigo and Adelaide Bank Limited. The Motley Fool Australia has recommended Tyro Payments and Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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