If you're looking for exposure to the banking sector, then Westpac Banking Corp (ASX: WBC) shares could be worth considering.
That's the view of analysts at Goldman Sachs, which believe the banking giant's shares could provide investors with strong gains and big dividends.
What's on offer with Westpac shares?
According to a note released this morning, the broker believes that Westpac shares are trading at a level that makes them very cheap.
In fact, its analysts estimate that "the stock is trading at a 24% 12-month forward PER discount to peers (historically a 3% discount)."
As a result, it sees scope for a significant re-rating from current levels and has retained its conviction buy rating on its shares with a slightly trimmed price target of $25.86.
Based on the current Westpac share price of $22.57, this implies potential upside of 15% for investors over the next 12 months.
But wait, there's more!
Don't forget the dividends
Goldman is also expecting the bank's full-year dividends to increase from $1.25 per share in FY 2022 to $1.44 per share in FY 2023 (and then to $1.50 per share in FY 2024).
This equates to a fully franked 6.4% dividend yield this year based on where Westpac shares are currently trading.
Goldman commented:
We reiterate our Buy recommendation (on CL) on WBC given: i) while NIM pressures are accelerating across the sector, WBC's shorter-duration replicating portfolio, and current balance sheet performance, should see its NIM outperform peers; ii) despite WBC recently revising its FY24E cost target to A$8.6 bn (from A$8.0 bn), the bank's performance on cost management remains strong in this inflationary environment, and we forecast a 9% step down in underlying costs over the next two years; iii) on our estimates, the stock is trading at a 24% 12-month forward PER discount to peers (historically a 3% discount), and iv) our TP of A$25.86 offers 23% TSR.
