This top broker is 'neutral' on Westpac shares

On December 5 the analysts at Goldman Sachs took a look at Westpac's valuation in the wake of the compliance failings scandal and as the RBN (NZ central bank) lifts the capital adequacy requirements on ADIs it regulates.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

a woman

Westpac Banking Corp (ASX: WBC) shares are loved by retail and institutional investors for their fully franked blue-chip dividends. Admittedly, its reputation got a hosing on the back of the AUSTRAC scandal, but even a record fine a mammoth fine is unlikely to hurt the dividend payouts over the short term. 

On December 5 the analysts at Goldman Sachs took a look at Westpac's valuation in the wake of the compliance failings scandal and as the RBNZ lifts the capital adequacy requirements on ADIs it regulates.

Fortunately Goldman's believes Westpac will be able to fund the additional capital it'll need in New Zealand by using retained earnings from the country.

The analysts also reckon that as Westpac has seven years to meet the new capital requirements the adjustments required won't be as impactful as first feared. 

It still thinks all the Australian banks' NZ subsidiaries are set to take a hit to return on equity in NZ, which is a key measure of profitability.

This is because the more capital banks have to keep idle in reserve, the less they can lend out at profitable returns. Therefore return on shareholder equity falls. 

Goldman's is fence sitting with regards to Westpac's shares in assigning a 'neutral' rating.

It has a 12-month price target of $25.58, versus the $24.24 price shares change hands for today. 

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

More on ASX Share Market News

3 children standing on podiums wearing Olympic medals.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors were back to hitting the sell button this Tuesday.

Read more »

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, and holding a mobile phone in his other hand.
Broker Notes

Buy, hold, sell: Domino's Pizza, Telix Pharmaceuticals, Westfarmers shares

Brokers have given their verdicts on these ASX shares.

Read more »

A rocket blasts off into space with planet behind it.
Opinions

SpaceX shares are flying. Here's the price I'd wait for

SpaceX is on my watchlist, but I’m staying patient.

Read more »

Two happy and excited friends in euphoria holding a smartphone, after winning in a bet.
Broker Notes

2 ASX 200 shares tipped by brokers to return 73% and 83%

Do you have either of these ASX 200 shares in your investment portfolio?

Read more »

Drone flying in the sky.
Opinions

DroneShield shares have crashed 51% in a year. Here's why I'd buy them today

DroneShield has plenty of risks, but its the that upside interests me.

Read more »

A bright graphic showing neon green and red arrows in a downwards direction with a world map behind them in neon blue.
ASX Share Market News

ASX 200 drops again as selling continues

The ASX 200 has slipped again, extending its recent run of losses.

Read more »

A male oil and gas mechanic wearing a white hardhat walks along a steel platform above a series of gas pipes in a gas plant.
Opinions

Santos shares are up 40% in 2026. Here's why I'd still buy them today

A big rally hasn’t changed my view on this ASX energy stock.

Read more »

A woman wearing a black and white striped t-shirt looks to the sky with her hand to her chin, contemplating buying ASX shares.
ASX Share Market News

$10,000 invested in Zip and New Hope shares 3 years ago is now worth…

How do the three-year gains from New Hope and Zip shares stack up?

Read more »