Pep Guardiola still wants Kyle Walker to stay at Manchester City for the next few seasons, that's because Kyle Walker is a special player for them. Kyle Walker's performance in the last few seasons has really made Manchester City good enough both in defense and in building attack. The speed that Kyle Walker has has helped Manchester City's defense to be stronger, especially in duels and cutting off opponent's passes. He is a strong figure for opposing wingers, so that is why Pep Guardiola really wants Kyle Walker to stay.
In the end Pep Guardiola probably couldn't do much for Kyle Walker other than speak for him and convince him to stay. Pep will still make Kyle Walker a major player next season, obviously he will be in his XI line up next season.
Pep Guardiola specifically said it and clearly that "Kyle Walker is an irreplaceable player", meaning Manchester City will want to keep him at any cost, some players are just important for the club, they don't put them among available players to price on unless the player want to live the club which they don't have power or control over but personally, I wish he stayed In Manchester city for now because they are still in form, there is more trophies than can be achieved here in Etihad.
There is nothing great like having a good guy in your team, Kyle is a very great defender that knows when to protect his defensive area, this is why Bayern are pushing to have him so they can develop their defensive midfield but considering his age again, I think he has played enough in Etihad, he has never played for Germany before and if that is his choice, so be it.