The Motley Fool

Here’s why Westpac Banking Corp (ASX:WBC) investors should be cautious

It never rains but pours for investors in AMP Limited (ASX: AMP).

The Australian Financial Review reported on Monday that Australia Post had decided to drop AMP as the default superannuation service provider for its employees.

While that news relates to AMP, I think it has implications for the big four banks Commonwealth Bank of Australia (ASX: CBA)Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB).

That’s because according to the AFR, workers’ unions were, “running a widespread ‘ban banks from super’ campaign to pressure the government into banning banks from operating super funds.”

Whether that proceeds or not is for speculators to decide but the fact of the matter is that Westpac is the only big four bank that has not yet announced plans to sell or demerge from its wealth management arm.

It comes at a time when there are significant regulatory headwinds for these businesses and the other big banks have clearly decided that having a wealth management arm might not be the best strategy going forward.

What now?

I think that whilst it might not be enough reason to sell Westpac shares (particularly for income-focused shareholders), investors should still consider how much exposure they have to the company and avoid being overweight on Westpac shares.

Contrarian view

One contrarian view that’s also worth considering is that Westpac might be playing the long game because now might not be the best time to sell your wealth management arm if everyone else is doing exactly the same thing.

As such, it might be a better strategy to take the short-term pain and only divest from wealth management when market conditions have changed.

Whether that turns out to be a good strategy or not, only time will tell but I think there might be better investment opportunities out there such as these three revolutionary companies.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can find Kevin on Twitter @KevinGandiya.

The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Related Articles...

Latest posts by Kevin Gandiya (see all)