The Westpac Banking Corp (ASX: WBC) share price was a strong performer in 2022.
Australia's oldest bank's shares rose a sizeable 9.4% during the 12 months.
This compares favourably to the S&P/ASX 200 Index (ASX: XJO) and its 5.5% decline during the same period.
It also means that it was the best-performing big four bank in 2022.
Why did the Westpac share price smash the market?
Investors were bidding the Westpac share price higher last year thanks to its much-improved outlook.
This was driven by the Reserve Bank of Australia increasing the cash rate to combat inflation, which has boosted bank margins materially.
For example, when Westpac released its FY 2022 results in November, it revealed a 5 basis points increase in its net interest margin (NIM) during the second half to 1.90%.
However, that's only the beginning of its NIM improvements, according to many analysts. In fact, Goldman Sachs highlights that "management's guidance on its FY23 NIM trajectory was better than we had previously anticipated." As a result, the broker now expects a NIM of 2.05% in FY 2023.
What's 2023 looking like for its shares?
While a lot can happen in the space of 12 months, as things stand, Goldman Sachs believes it is onwards and upwards for the Westpac share price.
So much so, the broker has a conviction buy rating and $27.60 price target on the bank's shares.
Its analysts believe Westpac and rival National Australia Bank Ltd (ASX: NAB) can provide double digit returns each year over the next three years. The broker explained:
The major Australian banks have been in the midst of an EPS upgrade cycle, with 12-month forward EPS having increased by an average of 21% p.a. over the last two years. However, the outlook is now less optimistic, with 12-month forward EPS now only representing a c. 4% p.a. tailwind to share prices over the next three years. Despite this, the outlook for our two Buy stocks, WBC (on CL) and NAB, is better, and we highlight why we think double digit total shareholder returns remains achievable over the next three years.
