All eyes will be on Westpac Banking Corp (ASX: WBC) shares on Monday.
That's because Australia's oldest bank is scheduled to release its full year results on that day.
Ahead of the release, let's take a look at what analysts are expecting the banking giant to report for FY 2022.
What is the market expecting from Westpac's FY 2022 results?
According to a note out of Goldman Sachs, its analysts expect the bank to report a 10.3% decline in total revenue to $18,866 million. This reflects reductions in net interest income, life insurance income, and wealth management income.
In respect to net interest income, Goldman is expecting a 19-basis points year over year decline in Westpac's net interest margin (NIM) to 1.85%. This will offset a 7.6% increase in its average interest earnings assets, driving a 2.2% reduction in net interest income to $16,350 million.
This is ultimately expected to lead to a 4% decline in cash earnings (before one-offs) to $5,140 million and a final dividend of 62 cents per share. The latter brings Westpac's full year dividend to $1.23 per share, up from $1.18 per share in FY 2021.
NIM on watch
One thing that the market will be watching closely on Monday is the bank's NIM.
Although Goldman expects Westpac's NIM to fall to 1.85% in FY 2022, recent cash rate rises mean that its margin outlook has improved materially. This bodes well for the bank given its growing interest earning assets.
Goldman is expecting Westpac's second half NIM to come in at 1.86%, after which it is forecasting an improvement to 1.96% in FY 2023.
As a result, commentary around the bank's exit NIM may prove to be the most important part of Monday's result. If the market believes it can hit 1.96% in FY 2023, the Westpac share price could respond very positively. Conversely, any downbeat NIM talk could weigh it down.
Are Westpac shares good value?
Goldman Sachs is very positive on Westpac's shares and has put them on its conviction list.
It currently has a conviction buy rating and $27.07 price target. Based on the current Westpac share price of $23.79, this implies potential upside of almost 14% for investors.
In addition, Goldman expects a fully franked 5.8% dividend yield in FY 2023, bring the total potential return closer to 20%.
