25% upside and healthy yield: Why this broker is bullish on the Westpac share price

Why is this one broker optimistic on the the bank’s outlook?

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Key points

  • The Westpac share price is slightly lower today 
  • However, one broker predicts its share price could surge by 25% 
  • It also tips the bank's dividend payouts could be in for a marked increase 

One broker is optimistic the Westpac Banking Corp (ASX: WBC) share price has the potential to surge significantly.

Westpac shares are currently swapping hands at $23.59, down 0.3%. The S&P/ASX 200 Financials Index (ASX: XFJ) is also in the red 0.23% at the time of writing.

So why do analysts think the Westpac share price can climb?

What is the outlook for the Westpac share price?

The team at Morgans says Westpac is a buy with a $29.50 price target. The broker is optimistic on the bank’s margin outlook and predicts it can achieve its cost-cutting targets.

Morgans has also made a prediction on dividends. The broker predicts Westpac will offer a fully-franked dividend of $1.19 per share in FY 2022. By 2023, Morgans predicts a dividend of $1.60.

Commenting on the outlook for Westpac, Morgans described the bank as “our preferred major bank”. It said:

We believe WBC offers the most compelling valuation of the major banks. In terms of quality of overall risk profile, we believe WBC is a close second to CBA. 

On credit risk, we believe WBC is positioned relatively defensively due to its loan book being more skewed to Australian home lending.

Westpac reported an unaudited statutory net profit of $1.82 billion in 1Q 22, up 80% on the quarterly average for 2H21. Cash earnings also grew 74% to $1.58 billion. The bank announced it would bring forward simplification plans and changes to its operating structure.

In other news from the bank, Westpac recently appointed a new executive Yianna Papanikolaou. As the chief transformation officer, Papanikolaou is responsible for major change, investment programs, and customer outcomes.

Westpac share price summary

The Westpac share price has dropped nearly 4% in the last year but has surged nearly 11% year to date.

For perspective, the S&P/ASX 200 Index (ASX: XJO) has returned almost 9% over the past year.

The company has a market capitalisation of about $82.6 billion.

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 recommended Westpac Banking Corporation. 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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