After a very difficult time in November, the Westpac Banking Corp (ASX: WBC) share price is bouncing back in December.
With just two trading sessions left to go, the banking giant's shares are up almost 5% month to date.
This puts the Westpac share price on course to record a gain of over 9% in 2021.
Why is the Westpac share price performing positively in December?
Investors have been buying Westpac's shares this month on the belief that they were oversold in November. That selling was caused by the release of the bank's full year results.
While those results revealed strong profit growth in FY 2021, they also revealed expectations for significantly weaker than expected margins in the year ahead. This is being caused largely by aggressive competition for home loans.
In addition, doubts over the bank's ability to achieve its FY 2024 $8 billion cost base target weighed on sentiment.
The rebound
The team at Morgans saw the weakness in the Westpac share price as a buying opportunity and it appears as though many investors agreed.
Early in December, the broker commented: "WBC's current share price of ~$20.50 would [..] assume that WBC only manages to reduce its annual cost base to $9.5bn by FY24F, experiences NIM contraction of 50bps from 2H21 to 2H24F and conducts no further capital management."
"We expect WBC to do notably better than this and we consequently believe that the extent of pessimism being reflected in WBC's current share price is overdone."
The good news for investors is that Morgans still sees plenty of scope for the Westpac share price to rise from here despite its recent run. The broker has an add rating and $29.50 price target on its shares. This implies potential upside of 37% over the next 12 months.
