Shares in Westpac Banking Corp (ASX: WBC) are rangebound today and now trade flat at $24.05 apiece.
The bank has whipsawed higher in 2022 and now trades at 3-month highs after sinking to its yearly lows back in February.
Zooming out, over the past 5 years, Westpac has wormed its way down to trade at its near-lowest levels in that time, separating March 2020 market activity from the question.
In that time, shareholders have seen their holdings evaporate by around 30% after failing to recover to pre-pandemic highs. The spread of the S&P/ASX 200 Index (ASX: XJO) above Westpac is now abundantly clear, and widening.
Westpac – best value or not?
According to analysts at JP Morgan, Westpac's outlook is "highly uncertain" and its revenue remains under pressure due to "compression on mortgage margins".
"Westpac's FY24 cost plan ($8 billion target ex Specialist) is highly ambitious given it requires an approximate 20% reduction from the FY21 cost base, but we expect the market to remain skeptical on achieving this," the broker said in a note.
"Westpac has a solid capital surplus but this is not dissimilar to peers and collective provision coverage is now at the bottom end of the peer range," it added, noting the investment proposition appears equally as bottom-heavy.
"In this context, and given our long-term concerns about the sustainability of mortgage margins across the industry (where WBC has a heavy exposure) we see the risk/reward as unattractive".
Judging from that perspective, there might be better picks. However, not everyone agrees. Over 29% of analysts covering the bank rate it a buy right now, whereas 53% are neutral, according to Bloomberg data (although many with investment banking relationships as well).
Meanwhile, Bloomberg Intelligence banking analysts Matt Ingram and Jack Baxter commented last month that Westpac's "strong balance sheet supports [a] big buyback".
"Westpac's 2022 distribution may once again top A$8 billion, supported by A$3.8 billion surplus capital as of December 31, decent profit and A$1.3 billion from divestments," the pair wrote.
They too identify potential issues with Westpac's competitiveness in the mortgage segment.
"Westpac's delinquent loans fell to 0.58% of total exposure at December 31, still well above peers. Its 57% coverage of overdue and impaired loans is below peers, but as the loans are largely secured with excellent collateral, this didn't require significant provisions," each commented.
Westpac's share price is still 2% in the red over the past 12 months even after spiking around 13% this year to date.
