The Westpac Banking Corp (ASX: WBC) share price has come under pressure today and dropped lower with the rest of the market.
In afternoon trade the banking giant's shares are down 1% to $26.56.
Should you buy the dip?
Whilst Westpac isn't my first pick in the banking sector right now, I still think it could be a good option for investors that have limited exposure to the sector.
After all, although its shares have rallied over 11% higher since Christmas Eve, they are still down almost 13% from their 52-week high and trading on relatively low multiples.
In addition to this, one leading broker believes that Westpac's shares are a buy and has tipped them to rally beyond their 52-week high this year.
According to a note out of Morgans from last month, the broker has an add rating and lofty $33.00 price target on the bank's shares.
This price target implies potential upside of 24% for its shares over the next 12 months excluding dividends. If you factor in the $1.88 per share dividend that the broker expects the bank to pay in FY 2019, this potential return stretches to a massive 31%.
Why is Morgans bullish on Westpac?
Morgans released the note in response to Westpac's first quarter update last month which revealed unaudited quarterly statutory net profit of $1.95 billion and unaudited cash earnings of $2.04 billion.
Although this first quarter result fell short of the broker's expectations, it remains positive on its prospects due to the bank's stable asset quality and positive capital position. Westpac is the broker's preferred pick in the sector.
What now?
Whilst I think that Morgans makes some great points, I have a preference for Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) right now due to their overweight exposure to commercial lending. I expect this to help offset weakness in the housing market and position them for growth this year.
