Why this broker sees the Westpac (ASX:WBC) share price hitting $30

Looking for a bank share to buy? Check out this one…

| 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

It has been a stunning year for the Westpac Banking Corp (ASX: WBC) share price.

Since the start of 2021, the banking giant's shares have risen almost 31%.

This is nearly triple the return of the S&P/ASX 200 Index (ASX: XJO) over the same period.

Two businessmen high five each other as the Optus plea to ACCC fails to impact the Telstra share price today

Image source: Getty Images

Is the Westpac share price run over?

The good news is that one leading broker believes the Westpac share price run is far from over.

According to a recent note out of Citi, its analysts have a buy rating and $30.00 price target on the bank's shares.

Based on the current Westpac share price of $25.62, this implies potential upside of 17% before dividends.

Citi is also forecasting a fully franked dividend of $1.30 per share in FY 2022. So, if we add this into the equation as well, the potential return increases to over 22%.

What did the broker say?

Citi came away from a meeting with Westpac's management team late last month feeling very positive about the bank's outlook.

While it acknowledges that Westpac is facing revenue headwinds, particularly in the Markets and Treasury businesses, it expects the bank's cost cutting plans to help offset this.

Earlier this year management announced an ambitious plan to cut its operating costs by almost 40% by 2024. This will see the bank's operating expenses fall from FY 2020's $12.7 billion to approximately $8 billion.

Citi expects this to underpin generous dividends in the coming years. The broker is forecasting a fully franked dividend of $1.16 per share in FY 2021 and, as mentioned above, $1.30 per share in FY 2022.

Based on the current Westpac share price, this will mean yields of 4.5% and 5.1%, respectively, over the next couple of financial years.

All in all, the broker believes this makes the Westpac share price good value at the current level.

Motley Fool contributor James Mickleboro owns shares of Westpac Banking Corporation. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Broker Notes

Business man marking buy on board and underlining it.
Broker Notes

6 ASX All Ords shares elevated to strong buy status after March sell-off

The ASX All Ords fell 8% in March after the US and Israel attacked Iran and oil and gas prices…

Read more »

Red buy button on an Apple keyboard with a finger on it.
Broker Notes

Brokers name 3 ASX shares to buy right now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman using a pen on a digital stock market chart in an office.
Broker Notes

Could these ASX stocks double by the end of 2026?

These 5 stocks could be undervalued.

Read more »

An investor wearing a dressing gown and holding a cup of coffee in a yellow mug gives a satisfied smile.
Broker Notes

7 ASX 200 shares just upgraded to strong buy ratings

Looking for inspiration after the March sell-off?

Read more »

A couple sitting in their living room and checking their finances.
Broker Notes

Buy, hold, sell: CSL, Magellan, and Woodside shares

Do analysts think these blue-chips are in the buy zone? Let's find out.

Read more »

I young woman takes a bite out of a burrito n the street outside a Mexican fast-food establishment.
Broker Notes

Up 32% this week, are Guzman Y Gomez shares a good buy today?

A leading analyst delivers his outlook for Guzman Y Gomez shares.

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Broker Notes

Buy, hold, or sell? Bubs, Soul Patts, and Endeavour shares

Experts have reviewed their ratings on these ASX shares.

Read more »

A woman in a red dress holding up a red graph.
Broker Notes

3 ASX shares tipped to grow 100% or more in the next 12 months

These stocks across three sectors could be deeply undervalued, analysts say.

Read more »