Deutsche Bank is the third major broker to recommend investors buy Westpac in under a week, citing near-term positive catalysts for the bank's share price.
The broker lifted its recommendation to "buy" from "neutral" and lifted its price target by 50 cents to $33, above JP Morgan's lift to $32.67 yesterday and Macquarie's increase to $32 last Friday.
Its reasons for the upgrade were Westpac's favourable second-half earnings growth for 2012-3 compared to the other big banks, the potential for a 10c per share special dividend, and a compelling valuation compared to the Commonwealth Bank – the standout performer at the moment.
Westpac is currently trading at a 6% discount to its peers and 7% to CBA. With that and a 6.2% estimated dividend yield for 2012-13, it offers good value to investors, says the broker.
Further, Deutsche found that Westpac has performed better than CBA by 1-2% on average in the eight weeks after CBA's results, which are due out on August 14.
"Whilst the near term earnings look bright, we do believe that over the long term WBC faces headwinds which are likely to see it grow below peers; however this will take some time to play out," Deutsche said.