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Is the Westpac share price a buy?

Is the Westpac Banking Corp (ASX: WBC) share price a buy?

A lot sure has happened over the past week to change the landscape for the banking sector. The Westpac share price is up another 2.3% today, it’s up around 12% since the start of the week.

The major ASX bank has had three quick-fire positives.

The first was obviously the surprise Liberal election win. Labor would probably have been tougher on the banking sector in light of revelations in the royal commission. Westpac is still working through customer remediation, but that might be the worst of it.

The second is that today the Australian Prudential Regulation Authority (APRA) has proposed removing the 7% home loan interest buffer for borrowers but instead have an additional 2.5% interest rate buffer (previously it was 2%) compared to what borrowers currently pay. I think is a fair move considering how low Australian interest rates have gone and could keep going lower.

Indeed, the third thing is that RBA’s Philip Lowe has suggested that with Australia’s unemployment rate slowly rising the interest rate could be lowered, but that’s not a guaranteed move.

Overall, these moves all seem beneficial for Westpac, particularly if house prices were to halt their fall due to the combination of the above factors. Another reason that property buyers might feel more comfortable is that Labor’s negative gearing policy won’t be implemented.

The share prices of Westpac’s big bank peers of Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) are also up materially this week.

Foolish takeaway

Combined with the impact of franking credits refunds remaining, Westpac has a number of positives for investors compared to last week.

The current Westpac grossed-up dividend yield of 9.5% seems attractive, but I think it’s too early to call the end of falling house prices for the rest of this cycle. With the share price rise now reflecting the positives, I certainly don’t think Westpac is a great buy today.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.