Westpac Banking Corp (ASX: WBC) shares have been on a solid run over the past 12 months.
However, one major broker believes investors might want to tread carefully in April.
Should you buy or sell Westpac shares this month?
After a closer look at the bank's ambitious transformation plans, analysts at Macquarie Group Ltd (ASX: MQG) have warned investors against buying its shares.
According to the note, the broker has reaffirmed its underperform rating on Westpac's shares with a $28.00 price target.
Based on its current share price of $31.57, this implies potential downside of over 11% for investors between now and this time next year.
What is the broker saying?
Macquarie's concerns centre on the bank's multi-year UNITE transformation programme — a plan aimed at reducing costs, improving customer service, and streamlining operations. While the broker acknowledges the ambition behind the strategy, it is not convinced Westpac will pull it off without a few bumps along the way.
In its note, Macquarie stated:
The proof in the pudding: It was pleasing to see WBC set targets, timelines, and financial implications for the UNITE programme. While ambitious and not without risks, we believe accountability is critical in driving large-scale projects.
The broker believes Westpac has made a good start, but warns that the market may be pricing in success too early.
We are still 12–24 months away from de-risking the programme to a point where there is a clear line of sight on management's ability to deliver objectives.
In other words, Westpac shares may not be reflecting the execution risk that could emerge in the next couple of years.
Valuation looks full
Another reason for Macquarie's bearish stance on Westpac is valuation.
The note reveals that Westpac shares are currently trading at approximately 17 times FY 2026 expected earnings. While this in line with National Australia Bank Ltd (ASX: NAB), but at a 26% premium to ANZ Group Holdings Ltd (ASX: ANZ). It feels that this is a stretch given the bank's uncertain path ahead. It said:
We see the valuation (which appears to largely discount any execution risk) as demanding.
Targets may be tough to hit
Westpac is targeting lower costs, improved service, and a more competitive cost-to-income (CTI) ratio. But Macquarie isn't convinced the numbers will stack up. It highlighted that even partial success could be helpful — but full delivery may be unlikely. The broker adds:
Arguably, even more ambitious targets include achieving a leadership position in service excellence and maintaining a CTI below the peer average by FY30 […] In the context of the scope of the programme, we see implied ~3% cost growth between FY25 and FY30 as an ambitious target.
Overall, Macquarie thinks investors should be staying clear of Australia's oldest bank for the time being and focusing on better opportunities elsewhere.
