The Westpac share price dumped 8% in May. What's next?

We check how Westpac shares fared in the past month — and where they could go from here.

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Key points

  • The Westpac share price fell 8% in May
  • Westpac shares traded ex-dividend during the month
  • The bank also delivered a 22% lift in profit to just over $4 billion in its half-year result

The Westpac Banking Corp (ASX: WBC) share price plunged in May, but are better days ahead?

Westpac shares slipped from $22.47 at market close on 28 April to finish at $20.68 yesterday. For perspective, the S&P/ASX 200 Index (ASX: XJO) fell 3% over the same period.

Let's take a look at what impacted the Westpac share price in May.

What's ahead?

Westpac is not the only ASX 200 bank share that has fallen in May. National Australia Bank (ASX: NAB) shares have dropped 10% since market close on 28 April, while ANZ Group Holdings Ltd (ASX: ANZ) shares have declined nearly 6%. Commonwealth Bank of Australia (ASX: CBA) shares have slipped 2.6% over the month.

During May, Westpac announced its half-year results. The company's share price climbed nearly 2% on the day.

The company delivered a 22% boost in net profit after tax (NPAT) to $4 billion. Net interest margin (NIM) lifted five basis points to 1.96%. Net interest income rose 10% to more than $9 billion. The bank's expenses also fell 7% during the half.

Goldman Sachs retained its buy rating on Westpac shares following the results with a $24.67 price target.

The Westpac share price fell nearly 3% on 11 May, the day the company traded ex-dividend. Eligible investors are due to be paid a fully-franked dividend of 70 cents per share at the end of June.

However, ASX 200 bank shares, including Westpac, fell between market close on 2 May and 4 May amid ongoing global banking turmoil. First Republic Bank in the US collapsed and had to be acquired by JP Morgan.

What's the outlook?

Looking ahead, the team at Morgans is bullish on Westpac, holding the view it has the "greatest potential for return on equity improvement" among the major banks.

Analysts said:

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. 

Baker Young managed portfolio analyst Toby Grimm also recently named Westpac among buy recommendations, stating:

This bank has underperformed its major peers by an average of 33 per cent during the past five years. Following a better-than-expected 2023 half year result, we see attractive relative value and dividend yield

Cost pressures continue to be a major detractor, but they are a controllable factor.

However, analysts at Morgan Stanley have recently cut Westpac shares to equal rate, as my Foolish colleague Bronwyn reported.

The broker has slashed its price target on Westpac shares by 8% to $21.

Share price snapshot

The Westpac share price has shed nearly 13% in the last 12 months.

Westpac has a market capitalisation of about $73 billion based on the latest share price.

Motley Fool contributor Monica O'Shea has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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