Westpac Banking Corp (ASX: WBC) shares have been flying again this month.
So much so, they hit a 52-week high of $30.56 on Tuesday before closing the session a touch lower.
This means that the ASX bank stock has now risen an incredible 47% since this time last year.
Unsurprisingly, given this strong performance, a number of brokers believe that the big four bank's shares are now overvalued.
One of those is Goldman Sachs, which responded to Westpac's quarterly update by reiterating its sell rating with an improved price target of $25.84.
Instead, the broker thinks investors should be buying a different ASX bank stock and is tipping good returns over the next 12 months.
Which ASX bank stock?
The stock in question is small business lender Judo Capital Holdings Ltd (ASX: JDO).
Although its shares jumped 10% on Tuesday following the release of its full year results, the broker still see room for them to climb further.
Commenting on the results, Goldman said:
JDO's FY24 cash earnings fell 5% on pcp to A$70 mn, broadly in line with GSe and Visible Alpha consensus (VAe). The quality of the result was good, with PPOP beating GSe and VAe by c.2%, on better NIMs. The BDD charge was 71 bp of loans, consistent with our expectations and measures of asset quality were generally better than we had expected. The CET1 ratio of 14.7% was down from 16.2% at Dec-23, but above GSe of 14.6%. FY25 guidance was largely reiterated.
In response, it has retained its buy rating with a price target of $1.71. This implies potential upside of 12% for investors over the next 12 months.
Goldman is struggling to see how the ASX bank stock will deliver on its profit growth guidance in FY 2025, but sees a lot to like here. It concludes:
While our analysis within struggles to reconcile JDO's FY25 PBT growth forecast of 15%, we like the operating leverage in the business, which we think will drive very strong growth in FY26. In particular, we highlight: i) management has shown that it can maintain growth in its balance sheet (+20% on pcp), while improving front-book lending spreads (4.3% in the Jun-24 quarter, vs. 3.9% pcp), ii) this should bode well for FY26E NIMs, which we now forecast to be >3%, iii) asset quality metrics have flattened out or improved and were better than we had expected, and so iv) despite >50% PBT growth in FY26E, and an ROTE trending to >10% by FY27E, the stock trades about in line with NTA. Buy.
