In 2025 to date, the Westpac Banking Corp (ASX: WBC) share price has risen an impressive 20%, as the chart below shows.
It's understandable why investors are more excited about the ASX bank share currently, as there have been a few positives going in the direction of the major bank.
For starters, in the FY25 third-quarter update, the bank told the market that its unaudited statutory net profit after tax (NPAT) grew by 14% (to $1.9 billion) compared to the quarterly average from the first half of FY25. Excluding notable items, the underlying net profit of $1.9 billion was up 8%.
The business reported a higher net interest margin (NIM) – higher profitability on its lending – with stronger income growth than expense growth. It's also targeting productivity initiatives to constrain cost growth. Additionally, impairment charges were only five basis points (0.05%) of average gross loans.
RBA cash rate cuts can also be beneficial in that they reduce the risk of borrower defaults, while seemingly increasing demand for credit.
With that in mind, let's take a look at what analysts are expecting to happen with the Westpac share price and then apply that to a theoretical $5,000 investment in the ASX bank share.
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Price target on Westpac shares
A price target is where investors think the share price will be in 12 months. It's not a prediction of a guaranteed rise or decline, but it's intriguing to know what analysts think of the bank's share price.
There are a number of analyst ratings on the ASX bank share. According to CMC Markets, there is a mixture of recommendations on Westpac, but they are either hold or sell ratings.
The best price target on Westpac is $38, which implies a possible decline of 3% over the next year.
However, the average target price on the Westpac share price implies a possible decline of 16% from where it is today. With a $5,000 investment, this implies a possible drop to $4,200 over the next 12 months. So, investing in Westpac shares could lead to value destruction.
Is the ASX bank share a buy?
According to CMC Markets, the average annual price-earnings (P/E) ratio for the business between FY15 to FY24 (ignoring the COVID-impacted FY20) ranged between 11.5 and 14.
But, using the forecast on CMC Markets, Westpac shares are currently trading at 19x FY25's and FY26's estimated earnings. Therefore, it's trading at a much higher earnings multiple than it has over the last decade.
At this higher valuation, I think it's worthwhile being more cautious on Westpac shares and looking at other opportunities.
