ASX bank shares have had a tough time in 2020. Shares in the major banks are underperforming the S&P/ASX 200 Index (ASX: XJO) which is down a hefty 19.75% this year.
But with a number of beaten-down options on the market, which is the best bank share to buy in 2020?
What’s the best ASX bank share to buy this year?
Let’s start with the obvious candidates: the Big 4 banks. The value of Australia’s major banks has been hammered this year with Westpac Banking Corp (ASX: WBC) one of the worst affected.
It’s not great news for the other majors with Commonwealth Bank of Australia (ASX: CBA) the least affected. CBA shares are still down 25.83% in 2020 and still underperforming the benchmark index.
I think the Big 4 are still so important to the Aussie economy. That means these ASX bank shares could be a solid long-term buy with strong profitability prospects going forwards.
However, I also like the look of Macquarie Group Ltd (ASX: MQG) shares right now. The Aussie investment bank is still worth $35 billion despite its share price falling 27.78% this year.
Macquarie has diversified earnings streams and is less reliant on deposits and mortgages than its Big 4 peers. Macquarie looks to be a strong ASX bank share with a handy 6.13% dividend yield in the context of a turbulent 2020.
What about the regional banks?
I’m not a huge buyer of ASX bank shares in general, let alone the regional banks. However, I think the regional banks could be too risky despite steep discounts in 2020.
For example, let’s look at Bendigo and Adelaide Bank Ltd (ASX: BEN). The Bendigo share price is down nearly 40% this year and I think its business could be dented by the coronavirus pandemic. While Bendigo does have a stake in the rise of the neobanks through its digital bank arm, Up, I think the risk might outweigh the rewards.
I think ASX bank shares could fall lower in 2020 but the long-term outlook is still good. While I won’t be buying just yet, I will be keeping a close eye on the Aussie banks and their earnings results in the coming months.
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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 and has recommended Macquarie Group 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.
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