The Westpac Banking Corp (ASX: WBC) share price has been fairly volatile since the beginning of 2022, like most ASX shares. But, it has managed an increase of 10% from the start of the year.
It's impossible to know what the Westpac share price is going to do in any given week, month, or even year. For example, no one could have genuinely seen that the COVID-19 pandemic was going to happen when it did.
How are things looking for the Westpac share price?
The broker Citi is optimistic about the big four ASX bank. Westpac is Citi's top choice compared to the other big four ASX banks of Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group Ltd (ASX: ANZ).
Citi notes that Aussie banks have been doing better than other international banks since the start of the Russian invasion of Ukraine, though this outperformance may not continue. Australian banks may be doing well because of their strong balance sheets and the fact that Australia has a lot of commodity exposure.
Banks such as Westpac could benefit from rising interest rates.
The US Federal Reserve has commented that interest rates could increase by 50 basis points in one go to combat the very high level of inflation in the US. Federal Reserve officials have indicated that interest rates are likely to increase at each meeting between now and the end of 2022.
Australian interest rates are expected to rise too. According to reporting by the Sydney Morning Herald, ANZ expects the RBA to increase rates in the third quarter of 2022. There are other predictions, such as CBA's, that the RBA could raise interest rates as early as June 2022.
Citi rates Westpac as a buy, with a price target of $27.
However, there are other brokers with much lower expectations.
For example, Morgan Stanley is 'equal weight' on Westpac, with a price target of just $22.40.
Recent profit performance
Last month, the bank released its update for the three months to 31 December 2021. It showed that the $1.82 billion quarterly profit was 80% higher than the quarterly average for the second half of FY21. The cash earnings of $1.58 billion were up 74%, though it was only an increase of 1% when excluding notable items.
Lending was up $5 billion, or 0.7%, over the quarter across institutional, mortgages and New Zealand.
The net interest margin was 1.91%, down 8 basis points due to competition and higher liquid assets.
Expenses were down 26% to $2.7 billion. Excluding notable items, expenses were down 7%.
There was an impairment charge of $118 million, mostly from increased 'provision overlays' reflecting continuing COVID-19 uncertainty.
Westpac said that asset quality metrics continued to improve and it had a "strong" common equity tier 1 (CET1) capital ratio of 12.2%.
