The Westpac Banking Corp (ASX: WBC) share price is back on form on Wednesday.
In afternoon trade, the banking giant's shares are up almost 1.5% to $25.80.
Why is the Westpac share price rising today?
Investors have been bidding the Westpac share price higher after a leading broker spoke positively about its third quarter update.
According to a note out of Goldman Sachs, its analysts have retained their buy rating and lifted their price target on bank's shares to $29.93.
Based on the current Westpac share price, this implies potential upside of 16% over the next 12 months before dividends.
Furthermore, Goldman has held firm with its dividends per share forecast of 116 cents in FY 2021 but increased its FY 2022 forecast to 128 cents and FY 2023 forecast to 141 cents. This implies yields of 4.5%, 5%, and 5.5%, respectively.
But perhaps the biggest positive is that the broker believes Westpac could announce a $5 billion off-market share buyback with its full year results later this year. This follows similar moves by its rivals.
What did the broker say?
Goldman commented: "WBC's Jun-21 (3Q21) Pillar 3 update highlighted that its asset quality and capital trends were run-rating broadly in line with our prior 2H21E expectations. That said, management's explicit commentary around its surplus capital and franking position, which will see the Board consider a return of capital, with an update at its FY21 results, does bode well for the timing of potential capital management."
"We move our FY21E/22E/23E EPS by +0.7%/+4.3%/+7.2%, driven by i) improved balance sheet momentum, ii) lower 2H21E BDDs, and iii) our assumption of an A$5bn off-market buyback in light of its surplus capital and franking, partially offset by iv) lower NIMs, and vi) higher near term expenses," it added.
Overall, the broker continues to see a lot of value in the Westpac share price at the current level. It also believes the risks are to the upside for its earnings. Especially given management's bold cost reduction targets.
