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Where next for the Westpac Banking Corp (ASX:WBC) share price?

Credit: Kiwiteen123

It has been a positive day of trade so far for the Westpac Banking Corp (ASX: WBC) share price.

In early afternoon trade the banking giant’s shares are up almost 1.5% to $26.30. This gain has reduced the bank’s year to date decline to 16%.

Should you be buying Westpac shares?

It certainly has been a difficult 12 months or so for Westpac and the rest of the banking sector.

During this time the budget levy, a slowing housing market, and the Royal Commission have weighed heavily on investor sentiment.

And while the housing market looks unlikely to improve any time soon, I believe the negative impacts on investor sentiment by the Royal Commission could ease in the near term.

This is because the end is now in sight for the inquiry and the final report is due out early next year.

I suspect that once that report is released investors will start to return to the banks should nothing unexpected be included in it.

After all, at present the likes of Westpac, Australia and New Zealand Banking Group (ASX: ANZ), and National Australia Bank Ltd (ASX: NAB) are all trading on multiples that are well below their historic averages and provide generous dividend yields.

I’m not alone in thinking that Westpac is in the buy zone right now. A note out of Goldman Sachs reveals that it has a buy rating on the bank’s shares with a $32.82 price target.

This price target implies potential upside of almost 25% for its shares over the next 12 months excluding dividends. Including its dividend this potential return extends to over 31%.

But Westpac isn’t the broker’s first choice in the sector. Its number one pick right now is ANZ Bank.

According to the note, Goldman has ANZ Bank on its conviction buy list with a price target of $31.52. This price target implies potential upside of almost 18% excluding dividends and approximately 23% with them.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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