Westpac Banking Corp (ASX: WBC) shares have pulled back meaningfully from their highs.
So much so, they ended the week at $35.84, which is down around 17% from their 52-week high of $43.32.
Is this a buying opportunity for investors? Let's see what Ord Minnett is saying about the big four bank.
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What is the broker saying?
Ord MInnett notes that Westpac recently released its half-year results.
Unfortunately, the broker wasn't overly impressed with the bank's performance during the six months. It highlights that Westpac's net interest margin weakened and its revenue missed expectations. And while it was pleased with its cost performance, it notes that this was largely due to seasonal factors. The broker explained:
Westpac Banking Corp said its core net interest margin narrowed 4bp half-on-half (HoH) to 1.78% in the first half of FY26, driven by intense competition for home loan and institutional customers that squeezed lending spreads and as the timing of interest rate rises offset the benefits from higher rates. That weak outcome came despite overall loan volumes, especially in the institutional division, growing strongly.
Cash earnings were pre-reported and the interim dividend was in line, but revenue missed consensus estimates, as a smaller contribution from markets and Treasury and reduced fee income weighed on non-interest income. Costs were a highlight, coming in 2% lower than market expectations, albeit largely due to seasonal factors, and Westpac has guided to increased costs in the second half as the bank lifts IT spending on the crucial UNITE project.
Earnings estimates downgraded
In response to the results, the broker has downgraded its earnings estimates for FY 2026 and FY 2027. This reflects net interest margin softness and higher expected costs. It said:
Post the result, we have cut our EPS estimates by 5.0% and 2.5% for FY26 and FY27, respectively, to incorporate narrower NIMs and higher costs as UNITE spending ramps up, while our FY28 forecast is bumped up 0.1%.
In light of this, Ord Minnett has retained its sell rating on Westpac shares with a $31.00 price target. Based on its current share price, this implies potential downside of 13.5% for investors over the next 12 months.
Commenting on its sell rating, the broker said:
We maintain our target price on Westpac and reiterate our Sell recommendation on valuation grounds, noting the bank faces challenges to convert its lending growth into meaningful revenue gains and has an increasing degree of execution risk the deeper it goes into the implementation phase of its UNITE program.
