The S&P/ASX 200 Index (ASX: XJO) banking sector has been hit hard by the coronavirus pandemic. Shares in the big four have been hammered lower in March alongside the rest of the ASX 200 companies. But amidst the bear market, could Bendigo and Adelaide Bank Ltd (ASX: BEN) emerge as a long-term buy?
Why it could be a great ASX 200 banking buy
It’s hard to argue that Australia’s economy does not rely on banking and mining. Bar CSL Limited (ASX: CSL), the major banks and miners make up many of the largest Aussie listed companies. Within that, the big four have a significant competitive advantage over the smaller players. The big banks control a huge majority of the Aussie lending market, which makes pricing and volume hard for the likes of Bendigo.
However, Bendigo has one play that might just make it an ASX 200 banking buy. Bendigo is the financial backer of the neobank, Up. Up launched in Australia in October 2018 and has been making waves. While it’s certainly not the only neobank on the market, Up has quickly gained a good reputation. With the banking sector under pressure, Up could provide Bendigo with a chance to gain on its competitors.
Neobanks are more nimble than the existing ASX 200 banking groups like Commonwealth Bank of Australia (ASX: CBA). CBA is a big, big company with a lot of products and divisions. All of this takes more money and more capital to be held against its riskier activities.
With less money tied up in branches and other operations, neobanks like Up are focused on building out their niche. I think we could see Bendigo really try and capitalise on its Up brand and make the shift early. If this pandemic is teaching us anything, it’s that there are surprises everywhere in the market.
What about the other banks?
It’s an interesting time for ASX 200 banking shares right, now given the big banks have been hammered on the ASX, but it’s hard to pick just how this pandemic will affect them. This isn’t the GFC, as the economic crisis isn’t actually a bank problem. However, a jump in unemployment and a likely recession are potential threats. Lower employment means the chance of defaults jumps for the banks. I personally think they’re in quite good shape to weather the storm and emerge relatively unscathed.
Whatever your views on the ASX 200 banking sector, it’s important that you don’t jump the gun. Make sure you consider any investment decisions and try to invest where you see the future. If that means investing in growth companies like WiseTech Global Ltd (ASX: WTC), then great. If it’s banking on Bendigo and Up, then do that. But most importantly, stick to your strategy and let your money work harder for you.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of WiseTech Global. 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.