It's looking like the ASX is set for a disappointing end to the trading week this Friday. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) has suffered a nasty 0.65% fall, despite a strong start this morning. But that loss for the index pales against what is happening to the Westpac Banking Corp (ASX: WBC) share price today.
Westpac shares are copping a belting right now, no other way to put it. The big four ASX 200 bank stock closed at $33.16 a share yesterday afternoon. This morning, those same shares opened at $33.17 but quickly started falling. At the time of writing, they are down a nasty 2.29% at $32.40 each.
So why is this ASX bank falling so far today?
What's up with the Westpac share price this Friday?
Well, it's hard to know for sure what's going on, as Westpac has made no price-sensitive news or announcements today.
However, there is a development that might explain what's going on.
As reported in The Australian today, ASX broker Morgan Stanley has cut its outlook on the Westpac share price. The broker downgraded its rating on the bank to 'underweight' and gave Westpac shares a 12-month price target of just 30. If realised, that would see the company lose around 7.6% from where it is today.
Morgan Stanley analyst Richard Wiles acknowledges that "everything went right" for the banks in 2024. However, he also argues that this has resulted in banks like Westpac now being "priced to perfection due to their 'safe-haven' status and a 'flow of funds' effect".
He went on to cite lower expected mortgage growth and rising expenses as the primary catalysts behind this pessimistic re-rating:
Project UNITE benefits are long-dated and the P/E multiple has re-rated to about 16 times… We believe there has been a big shift in investor expectations and positioning over the past 12 months…
While multiples have remained elevated for many months, we think a de-rating is likely in the year ahead… In our view, current share prices already factor in meaningful upgrades to consensus EPS and dividend forecasts from the combination of a stable regulatory backdrop, a robust economic recovery, a benign competitive environment, a low risk profile and further capital management initiatives.
It wasn't all bad news for bank investors, though. Morgan Stanley also upgraded its view on Westpac's big four stablemate ANZ Group Holdings Ltd (ASX: ANZ). The broker now has an 'equal weight' rating on ANZ, with a 12-month share price target of $27.80.
This might explain why Westpac is currently the worst-performing member of the big four while ANZ is the best. The latter is currently down 1.0% at $29.08 a share.
