Shares in the banking big 4 member Westpac Banking Corporation (ASX: WBC) are inching higher this morning and now trade less than 1% in the green at $20.90.
Westpac shares started to tumble at the end of October after the company revealed its full-year results, leaving many investors and analysts alike unimpressed with its performance.
The Westpac share price has come down hard from a high of $26.23 in October and continued its downward path until climbing again in December.
With this in mind, several leading investment firms have afforded us their opinion on the outlook for Westpac investors. So is Westpac a buy? Let's find out.
What are brokers saying about Westpac?
The team at Citi reckons Westpac is a buy right now. However, in a recent note, the firm also acknowledges Westpac's off-market buyback is of less value compared to that of banking rival CBA.
It notes that the complex moving parts involved with off-market buybacks have created a peculiar situation for the bank. This comes after it recently extended the tender period and reworked the discount it was awarding on the offer.
Even after the revision, the bank's post-tax returns are still a way behind CBA's 13% gain, the broker notes. City says, "With less tax benefits on offer, we expect Westpac will likely receive significantly less demand than CBA but has pledged to redirect any shortfall into an on-market buy-back."
Nevertheless, Citi has Westpac as a buy and is attracted to the bank's current valuation after the pullback in its share price over the last 2 months.
Fellow investment bank Jefferies isn't so rosy on the outlook for Westpac shares, noting it needs a cultural overhaul rather than focusing on its $8 billion cost-reset strategy in FY24.
Jefferies also is critical of Westpac's buyback, noting the $3.5 billion off-market purchase of its own shares is less attractive due to the run down in its share price. It says this effectively reduces the fully-franked dividend component of the buyback.
It also forecasts another compression of Westpac's net interest margin (NIM) in its trading update in January. It points out potential investor dissatisfaction on the horizon if shareholders employ the first no vote strike on its remuneration report at its AGM tomorrow.
Jefferies has Westpac as a hold and values the company at $19.20, implying a small percentage of downside potential at the time of writing.
Finally, Goldman Sachs also weighed in on Westpac's investment debate in a recent note. Goldman says the bank's recent results are an indication of a weak platform to grow revenue in FY22.
It too retains its neutral rating on the banking major and thinks the market might need to apply a heavier discount on Westpac's potential to reach its FY24 $8 billion cost target.
Goldman values the bank at $25.60 per share, even with its neutral rating, implying almost $5 of upside potential at the time of writing.
Meanwhile, Morgans has Westpac as a buy, whereas Jarden, Barrenjoey, and Evans & Partners have it as a sell.
Westpac share price summary
In the last 12 months, the Westpac share price has gained just over 4%, climbing 8% this year to date.
However, during the past single-month period to date, it has reversed course and is now trading around 8% in the red.
