With fears of inflation and the housing boom plateauing, the recent hot run for the ASX shares of the major banks is threatening to come to an end.
Investors can't complain, though. The S&P/ASX 200 Financials (ASX: XFJ) has gained more than 46% over the past 12 months. And that's not even including the dividends and one-off share buybacks.
So, is the party over for bank shareholders?
Not quite. A couple of experts are still bullish on one particular big bank, believing the Westpac Banking Corp (ASX: WBC) share price is ready to ascend.
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Bursting through the price barrier
Westpac is due to report and hand out its latest dividend over the next few weeks.
Fairmont Equities managing director Michael Gable believes the stock wants "to rally" coming into that period.
"What's interesting is that we had a share price peak in June," he told Finance News Network.
"As it tried to recover, instead of it being sold back down … it's just managed to head sideways. This is a good sign."
Gable believes once the recent $25.74 resistance level is breached, Westpac shares could gain momentum upwards.
The good news is that this has already happened since Gable spoke earlier in the week. The Westpac share price closed at $26.23 on Thursday afternoon.
A Westpac share buyback "likely"
Morgan Stanley Wealth Management head of research Nathan Lim currently rates Westpac shares as "overweight".
"Westpac's credible new cost strategy and targets should support earnings and a recovery in return on equity," he posted on Livewire.
"The potential for further divestments on top of already announced asset sales will help to boost capital and simplify the business. The bank has taken sound provisioning measures and we observe falling loan losses."
According to Lim, Westpac shares are going for a "discount" compared to the other major banks.
He's excited about the potential for returns to shareholders this year.
"We anticipate building excess capital, with shareholder-friendly buybacks a likely consequence," said Lim.
"The payout ratio is sustainable and we forecast a strong, multi-year dividend rebound."
The Morgan Stanley team is expecting Westpac's 2021 second-half cash profit to include about $1.3 billion of "notable items".
"Morgan Stanley believes the key areas of focus regarding the result will be: Australian loan growth trends, the 2H21 margin decline and outlook commentary, an update on the Cost Re-set plan and any FY22 expense guidance, and a potential off-market buyback."
