Why this top broker is bullish on the Westpac (ASX:WBC) share price

Westpac is Tyndall Asset Management’s top bank holding. Here’s why it’s bullish.

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The Westpac Banking Corp (ASX: WBC) share price is the best performing big four bank so far this year, up 32% to February 2020 levels of $26.

In terms of recent performance, shares in the leading bank boomed bewteen January and mid-June, rallying from $19.37 to a year-to-date high of $27.12.

The Westpac share price has plateaued since mid-June, broadly coinciding with the peak of lending indicators from the Australian Bureau of Statistics (ABS).

Despite Westpac shares trading sideways for the past 4 months, it has held up relatively well amid the volatile S&P/ASX 200 Index (ASX: XJO) and concerns about rising interest rates.

In an interview with Livewire, head of equities at Tyndall Asset Management Brad Potter was particularly excited about Westpac, his top bank holding.

Why this broker is bullish on the Westpac share price

Potter is bullish on the banking sector, with an overweight rating.

He views Westpac as a top pick in the sector, expecting the bank to announce a “very large” off-market buyback as part of its full-year results announcement on 1 November.

Just a week ago, the Commonwealth Bank of Australia (ASX: CBA) completed its $6 billion off-market buy-back, representing around 3.82% of its shares on issue.

CBA management described the move as “the most efficient and value-enhancing strategy to distribute CBA’s surplus capital and franking credits”.

With bank dividend yields bouncing back to the 5% level and an excess amount of capital, Potter said:

We think these buybacks and dividends will continue for a number of years given the huge amount of capital that the banks have got.

Despite a positive outlook, Potter warned that banks may struggle to keep up the momentum in the near term, facing net interest margin challenges on the back of ultra-low interest rates.

The Westpac share price closed 0.39% higher on Monday to $26.06.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. 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.

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