The Westpac Banking Corp (ASX: WBC) share price is under pressure on Friday.
In afternoon trade, the banking giant's shares are down 1% to $25.28.
Is the weakness in the Westpac share price a buying opportunity?
One leading broker that believes the weakness in the Westpac share price is a buying opportunity is Morgans.
This morning the broker has updated its forecasts, resulting in its analysts retaining their add rating and $29.50 price target.
Based on the latest Westpac share price, this implies potential upside of almost 17% over the next 12 months. And with Morgans forecasting a dividend yield of 4.5% over the same period, this potential return stretches beyond 21%.
What did the broker say?
Morgans has updated its forecasts to reflect the sale of its Westpac Life New Zealand business and potential fraud provisions relating to Forum Finance.
While this has resulted in a 2% reduction in its FY 2021 earnings estimates, its longer term forecasts are not materially impacted.
Morgans said: "WBC has also said that it has a potential exposure of ~$200m after tax to Forum Finance, with the extent of any loss dependent on the outcome of its investigations and recovery actions underway.
"We understand that the recovery process may play out over a prolonged period, and we therefore expect WBC to raise an individually assessed provision of ~$290m for the full exposure to Forum Finance in 2H21F. However, we see potential for this provision to be partially written back over time," it added.
"We have reduced our FY21F cash EPS by 2% as a result of the higher credit impairment charge stemming from the Forum Finance exposure. We have not materially changed our cash EPS forecasts for the outer years," Morgans concluded.
