The Motley Fool

What does COVID-19 mean for ASX 200 bank shares in 2020?

The big 4 ASX 200 bank shares have been all over the place in March. The Commonwealth Bank of Australia (ASX: CBA) share price has gone from 52-week high to 52-week low in the space of roughly 1 month.

The Aussie banks are starting to mobilise in line with the government and the Reserve Bank of Australia (RBA) to soften the economic impact of the coronavirus pandemic. But what does that all mean for the ASX banking shares right now?

What’s happening with ASX banking shares?

I think we’ll see more volatility in the likes of National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC).

NAB shares surged 7.48% higher on Friday but have still seen steep losses this month. Similarly, the Westpac share price climbed 8.53% to $15.77 per share at Friday’s close, but that’s just under half of what it was valued at in September 2019.

ASX banking shares are hard to value right now for a number of reasons. The first is the COVID-19 pandemic, which is set to ramp up in coming weeks. We’ve already seen the immediate impact on ASX travel shares, as well as the entertainment and hospitality sectors. 

However, I think we could see more indirect industries start to be heavily traded on the ASX. We’re already seeing that with Aussie supermarket shares but I think the impact could go even further. Given the banks are heavily involved in business lending, any remedial actions will likely have an impact on its current share price.

While a recession may be on its way, the key for the banks is asset quality. If we see major defaults across residential and commercial loans, then ASX banking shares could be under pressure.

The second thing that we’re seeing is the impact of the recent RBA rate cuts. Lower rates do provide relief to borrowers, but also squeeze profit margins. That could put the NAB and Westpac earnings under pressure when they report in early May.

Foolish takeaway

ASX banking shares are worth keeping a close eye on in March. There are so many uncertainties right now, but heavily selling can be disproportionate in times of panic. 

If banking shares aren't in your buy zone, check out these 3 ASX dividend shares for a cheap price today.

The Motley Fool AU Announces Top 3 Dividend Shares To Buy For 2020

When Edward Vesely -- The Motley Fool Australia's resident dividend expert -- has a stock tip, it can pay to listen. With huge winners like Dicker Data (up 66%) and SDI Limited (up 57%) under his belt, Edward is building an enviable following amongst investors that are planning for retirement.

In a brand new report, Edward has just revealed what he believes are the 3 best dividend stocks for income-hungry investors to buy now. All 3 stocks are paying growing fully franked dividends giving you the opportunity to combine capital appreciation with attractive dividend yields.

Best of all, Edward’s “Top 3 Dividend Shares To Buy For 2020” report is totally free to all Motley Fool readers.

Click here now to access this free report.

As of 17/3/2020

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. 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.

FREE REPORT: Five Cheap and Good Stocks to Buy now…

Our Motley Fool experts have FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.7% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.