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.
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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.
