The Westpac Banking Corp (ASX: WBC) share price fell slightly in November, but could December be a better month?
Westpac shares fell 1.4% in November to close the month at $23.77. For perspective, the benchmark S&P/ASX 200 Index (ASX: XJO) climbed 6.1% in November.
Let's take a look at the outlook for the Westpac share price in December.
What's going on at Westpac?
The ASX bank share had one major announcement that appeared to impact its share price in November. On 7 November, the Westpac share price slid 4% on the back of the company's full-year results.
The bank's cash earnings fell 1% to $5.276 million in the 12 months ending on 30 September. However, despite this, the board still declared fully franked dividends of $1.25 per share . The bank's net interest margin fell 17 basis points to 1.87%.
However, overall, Westpac shares have still climbed 10% year to date.
Meanwhile, the team at Morgans has named Westpac among the best ASX share ideas for December.
Analysts said they view Westpac as having "the greatest potential" for return on equity improvement among the major banks, provided its business transformation initiatives are successful. Morgans added:
The sources of this improvement include improved loan origination and processing capability, cost reductions (including from divestments and cost-out), rapid leverage to higher rates environment, and reduced regulatory credit risk intensity of non-home loan book.
Yield including franking is attractive for income-oriented investors, while the ROE improvement should deliver share price growth.
Morgans has placed an add rating on the Westpac share price with a $25.80 price target. Its shares are currently swapping hands for $23.44 apiece.
Goldman Sachs has a buy rating on the Westpac share price despite the lower net interest margin (NIM) in FY22. The broker said:
While on the surface, the FY22 result suggested WBC's NIM leverage was underwhelming relative to some peers, we think 2H22 was adversely impacted by late-in-the-half liquidity build, and management's guidance on its FY23 NIM trajectory was better than we had previously anticipated.
What else?
The Reserve Bank of Australia lifted the official cash rate by a further 0.25% to 3.10% earlier this week. Following this announcement, Westpac announced it would increase its home loan variable interest rates by 0.25% for new and existing customers from 20 December.
Commenting on the impact of inflation and interest rates on the bank's approach to capital management in The Australian this week, Westpac CEO Peter King said:
When I think about the bank, we've built our capital levels and we've got good liquidity buffers — so the bank is in really good shape heading into 2023, where we expect growth to slow.
We're in a good position to help customers get through some of the challenges that the current environment is producing.
Share price snapshot
The Westpac share price has risen nearly 12% in the last year.
For perspective, the ASX 200 has fallen around 3% over the past 12 months.
Westpac has a market capitalisation of about $81.5 billion based on the current share price.
