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Could this one factor smash ASX bank shares in 2020?

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ASX bank shares have been hammered lower in 2020. Many of the Aussie banks’ valuations have slumped 20–40% lower in the current bear market.

A lot of this is driven by concerns over the coronavirus pandemic. Many businesses have shut down and Aussies are struggling for income right now.

That means attention has turned to the banks for help. APRA is putting the pressure on ASX bank shares by strongly encouraging them to slash dividends this year.

The Federal Government has asked the banks to step up and help out Aussies in these unprecedented times.

But could this one debt-laden sector bring down ASX bank shares even further in 2020?

Why ASX REITs could trigger an ASX bank share price collapse

There aren’t that many sectors that have flourished amid the pandemic. Apart from the Aussie supermarkets, most ASX 200 shares were smashed in March.

The ASX real estate investment trusts (REITs) have been some of the hardest-hit shares in recent times. At the time of writing, the Stockland Corporation Ltd (ASX: SGP) share price had climbed 26.36% last week but was still down 34.63% for the year.

It’s a similar story for Vicinity Centres (ASX: VCX) shares, which rocketed 30.56% last week but remain down 43.37% for the year.

And now there’s a chance that ASX bank shares could feel more pain because of the Aussie REITs.

According to an article in the Australian Financial Review, the heavily indebted REITs could put pressure on the banks’ loan books in 2020.

This is particularly the case in the retail and office sectors. Shopping centres are largely empty right now and many tenants have closed their doors for now.

Similarly, most offices have directed employees to work from home, which has raised questions about rental payments.

Looking further down the line, who’s to say that we won’t see companies move to a more virtual business model, cutting back hefty rental expenses after the coronavirus pandemic passes.

But all of this means ASX bank shares could be impacted in 2020. If we see ASX REITs writing down their asset values, that may lead to more impairments from the Aussie banks.

Foolish takeaway

There is a lot of speculation and “what ifs” about the pandemic right now. Personally, I think ASX bank shares could still be in the buy zone. The banks are well-capitalised and could emerge in a strong position in 2021.

Whether the ASX REIT asset valuations will put pressure on ASX bank shares remains to be seen.

In the meantime, it’s best to trust your investment strategy and only invest in companies that you want to buy and hold for the long term.

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Motley Fool contributor Ken Hall 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.

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