The Westpac Banking Corp (ASX: WBC) share price has had a fairly robust year so far in 2021.
Whereas the S&P/ASX 200 index (ASX: XJO) has climbed about 12.4% since 1 January, Westpac shares are more than 32% in the green.
So, what’s the outlook for the oldest of Australia’s big 4 banks?
Westpac has a market capitalisation of $95.8 billion and its share price has climbed a further 4.7% into the green over the past month.
Its shares did slide after the release of its third-quarter update back in August, however.
In the update, Westpac advised it had a CET 1 ratio of 12% on a pro forma basis, and that it is considering returning capital to shareholders as a result.
Despite this, the company also advised it was facing several upcoming headwinds.
For instance, Westpac stated it was facing net interest margin (NIM) pressures and forecasts its NIM for the second half of 2021 to come in lower versus the first half.
It also estimates that expenditures will be higher across the board in FY21 year over year.
Westpac also has a number of planned divestments set for the second half of 2021. These include the sale of Westpac LMI, Westpac Pacific, Motor Vehicle finance, and NZ Life Insurance.
Combined with the sale of General Insurance in July this year and Westpac Life Insurance in FY22, all transactions should deliver a 50 basis points “divestment benefit” to the company’s CET 1 ratio.
What else can be said for the outlook on Westpac shares?
Top brokers have also weighed in, and foresee more value in the Westpac share price. Leading broker Goldman Sachs recently retained its buy rating on Westpac shares and assigned a $29.03 price target.
Goldman likes the Westpac share price based on the company’s fundamentals and valuation. For instance, the investment bank sees the upcoming divestments as a way to release capital and bring operations “back towards Australia and New Zealand banking” — both positives in its eyes.
The broker’s words are echoed by analysts from Morgans, who have an add rating with a $29.50 price target on the Westpac share price. It also believes the company will reinstate its dividend.
The 4.7% gain in the Westpac share price over the past month compares favourably to the Commonwealth Bank of Australia (ASX: CBA) shares, down 0.19% and Australia and New Zealand Banking Group Limited (ASX: ANZ) shares, down 0.79%.
The Westpac share price has posted a return of 47.5% over the past 12 months, which has outpaced the ASX 200’s gain of about 23%.
Although COVID-19 has plagued the Australian retail and commercial sectors, some experts say the Westpac share price may be set to deliver more gains yet.
It appears the company has made a number of capital budgeting decisions that may positively impact its share price over time, when the full effect of divestments and restructuring efforts are realised.