The Westpac Banking Corp (ASX: WBC) share price was under pressure on Monday.
Investors were selling down the banking giant's shares in response to its third-quarter update.
For the three months ended 30 June, Australia's oldest bank reported an unaudited net profit of $1.8 billion. This represents a 10% decline from the first-half quarterly average of $2 billion.
Management advised that this reflects resilient operating revenue, assisted by ongoing disciplined margin management.
Is the Westpac share price good value now?
Despite trading within sight of its 52-week low, the team at Goldman Sachs still doesn't see enough value in the Westpac share price to recommend the bank as a buy.
According to a note, the broker has retained its neutral rating with a trimmed price target of $22.57.
Based on where its shares are currently trading, this implies a potential upside of 9% for investors.
What did the broker say?
Goldman was disappointed, but not overly surprised, with Westpac's rising costs. It notes that this was something it had warned investors about recently. The broker said:
WBC has released its 3Q23 trading update, with unaudited cash earnings from continuing operations of A$1.8 bn, down 12% on the 1H23 average, but run-rating 4% above what was implied by our prior 2H23E forecasts. However, the better reported "statutory" performance was more than driven by gains related to hedging.
We reiterate our Neutral rating given: i) our previously noted concerns over WBC's cost management, with the bank moving away from its FY24 absolute cost target at its 1H23 result, and then the higher than expected 3Q23 costs, ii) WBC's relative skew towards consumer lending is a relative headwind given we are incrementally more negative on system housing loan growth, vis-à-vis commercial, and iii) WBC's core NIM continues to fall, in which we expect to see further relative pressures, given our expectation of more heightened competition in retail banking.
