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Is the Westpac (ASX:WBC) share price the best bank idea for dividends?

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Could the Westpac Banking Corp (ASX: WBC) share price be a smart idea for dividends?

There are plenty of different banking options on the ASX for investors to choose between such as the major banks like Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group Ltd (ASX: ANZ).

Smaller banks are also possibilities, such as Bank of Queensland Limited (ASX: BOQ), Bendigo and Adelaide Bank Ltd (ASX: BEN), Suncorp Group Ltd (ASX: SUN) and Mystate Ltd (ASX: MYS).

How is the Westpac share price going?

Before this latest volatility amid the Russian invasion of Ukraine, Westpac shares were staging a recovery. Between 31 January 2022 and 21 February 2022, the Westpac share price had climbed 17.5%. However, since then it has fallen almost 9%.

It’s not alone, the other big four ASX banks have also dropped in recent weeks.

Is it a good opportunity today?

The broker UBS certainly seems to think so.

It recently increased its price target of the Westpac share price to $27, suggesting a possible upside of more than 20%. A driver of this decision is the fact that the banks can keep generating good profits during these uncertain times, whilst experiencing an uplift in the net interest margin (NIM) after recent loan rate hikes.

For UBS, Westpac is the pick of the bunch.

However, Credit Suisse is not so sure. This broker is only ‘neutral’ on the business with a Westpac share price target of $23 – which still suggests a single-digit rise over the next 12 months. After seeing Westpac’s quarterly update, Credit Suisse is expecting the FY22 NIM to fall because of competition.

In that first quarter to 31 December 2021, Westpac announced that it made cash earnings of $1.58 billion. This was up 74% compared to the quarterly average of the second half of FY21.

However, after excluding ‘notable’ items the cash profit only went up 1%. There was an impairment charge of $118 million, mostly from an increased provision reflecting continuing COVID-19 uncertainty.  The NIM was 1.91%, down 8 basis points due to competition and higher liquid assets.

What about the Westpac dividend?

The big four ASX bank doesn’t announce quarterly dividends. The next dividend announcement will probably be with the half-year result in a couple of months.

UBS is expecting Westpac to pay a dividend that equates to a grossed-up dividend yield of 8.5% in FY22.

However, Credit Suisse is only expecting a grossed-up dividend yield of 7.4% in FY22 at the current Westpac share price.

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