Westpac Banking Corp (ASX: WBC) shares were under pressure on Monday after the banking giant released its half year results.
Unfortunately, the selling has continued on Tuesday with Australia's oldest bank down a further 1.5% to $31.90 at the time of writing.
Is this a buying opportunity? Let's see what analysts at Macquarie Group Ltd (ASX: MQG) are saying about the big four bank.
What did the broker think of its results?
Macquarie highlights that Westpac's results were short of expectations, which has caused a review of the market's bullish assumptions for its future performance. It said:
While WBC's 1H25 result was only a slight miss to expectations, it provided a catalyst for the market to review its bullish assumptions on margins, expenses, and dividends. We expect to see consensus revisions towards our more conservative FY26-27 forecasts, noting that we reduced our numbers by ~1%.
The broker also highlights that its performance would have been worse if had not been for tailwinds from the replicating portfolio. And with those tailwinds now easing, it could be bad news in the second half and FY 2026 if the Reserve Bank of Australia cuts interest rates. It explains:
WBC delivered a softer 1H25 margin with greater-than-expected tailwinds from the replicating portfolio offset by headwinds from deposit and lending competition. As replicating portfolio benefits diminish in 2H25 and the impact of rate cuts and competition weigh on margins, the revenue outlook will become more challenging in 2H25 and FY26. We forecast a ~3bps fall in margins from 2H25 and ~8bps in FY26.
What are Westpac shares worth?
As you might have guessed from the way that Macquarie is talking about the bank, it isn't recommending it as a buy to clients.
According to the note, the broker has reaffirmed its underperform rating with a trimmed price target of $27.50.
Based on its current share price of $31.90, this implies potential downside of almost 14% for investors over the next 12 months.
Macquarie believes that Westpac shares are expensive. It said:
WBC remains expensive, trading at ~17x FY26E P/E (6-26% premium to ANZ and NAB). With execution risks around the UNITE program, in addition to headwinds from rate cuts, we continue to see risk to WBC's earnings and multiple. Maintain Underperform.
All in all, based on what Macquarie is saying, it could be worth waiting for a pullback in the Westpac share price before considering an investment.
