The Westpac Banking Corp (ASX: WBC) share price is on the tumble today.
At the time of writing, the Westpac share price is down 0.61% to $16.29 a share, after falling as low as $16 earlier in the trading day. This heavy sell-off was prompted by the revelation this morning that Westpac is looking at a monster $1.3 billion fine in a settlement with the government financial regulator AUSTRAC. As my Fool colleague James Mickeboro reported this morning, Westpac had estimated the penalty would be around $900 million (which it offered to settle at), which means the bank will now have to reevaluate its books. That’s partly behind today’s share price fall, in my view.
So, now Westpac shares are trading at the lowest levels we have seen for 4 months, is this ASX banking giant a buy today?
Is the Westpac share price an ASX banking buy?
On one level, Westpac shares do look cheap-ish. Westpac is currently trading on a price-to-earnings (P/E) ratio of 12.16. That isn’t as low as its sibling Australia and New Zealand Banking Group (ASX: ANZ) at 11.26, but it is much lower than National Australia Bank Ltd‘s (ASX: NAB) 15.28 or Commonwealth Bank of Australia‘s (ASX: CBA) 15.6. But then again, CBA and NAB are both paying dividends this year, whereas Westpac shareholders have had their interim dividends cancelled on them. Perhaps a December final dividend from Westpac can make up for this, but I’m not holding out much hope seeing as the bank is down $1.3 billion today.
Quite frankly, I wouldn’t touch Westpac with a 10-foot pole today. I don’t think I would if this bank were sitting at $12 a share.
Westpac your bags
Why? Well, firstly, I’m not too impressed with the bank’s conduct. Yes, Westpac CEO Peter King has offered a full apology and stated that ‘we need to do better‘. Bu this is the largest fine in Australian corporate history for a reason.
Secondly, there’s not much in the way of dividends coming out of this bank for a while in my view. The economy is not in good shape, credit growth is likely to remain sluggish and interest rates remain at virtually zero – all headwinds for Westpac and its ability to generate earnings from which to pay dividends.
Thirdly, Westpac has not had a good history of delivering for its shareholders in my opinion. Sure, the company had paid decent dividends for the past decade. But it has also delivered virtually nothing in terms of capital growth. Today the Westpac share price is sitting at $16.20. That’s the same share price investors could have bought in back in February 2002! If you had bought Westpac shares for a child born at that time, they would have to fund their first drink in 2020 with last year’s dividends.
Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.
*Returns as of 6/8/2020
Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. 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.
- PayPal to offer bitcoin, cryptocurrency payments – October 23, 2020 12:22pm
- Why you shouldn’t sweat the small stuff when it comes to investing – October 23, 2020 10:47am
- Woodside (ASX:WPL) share price still at 16-year lows. Time to buy? – October 23, 2020 10:27am