The ASX banking sector has had a troubled year, as most ASX investors would be aware. Given the big four banks provide the foundation of the S&P/ASX 200 Index (ASX: XJO), with a weighting of close to 20%, their share price movements influence the broader market in a major way, like it or not.
That’s why we can thank the banks for a large part of the ASX 200’s stellar rise over the month of November. I discussed this earlier in the week, and we determined that National Australia Bank Ltd (ASX: NAB) was the standout performer, having appreciated more than 24% in value over November (although all four of the majors were up more than 10% over the month). November was reportedly the best month for ASX 200 shares since the 1980s, and this was a big reason why.
But since the ASX banks had such a strong month, are any of them still buys today? Remember, the bank sector is still facing some structural issues, such as record low interest rates.
Well, one broker thinks so. Goldman Sachs Group Inc (NYSE: GS) is one of the most followed investment banks in the world. Its recommendations are closely monitored by many investors.
So what does Goldman think of the ASX bank shares today?
A broker rates the ASX banks
Goldman is not too keen on Commonwealth Bank of Australia (ASX: CBA) for one. It is currently rating CBA as a ‘sell’ and giving CBA shares a price target of $65.55, stating “the market continues to ignore the earnings impact of lower rates and focuses on dividend yield”.
It’s not wild on Australia and New Zealand Banking Group Ltd (ASX: ANZ) either, giving ANZ a ‘neutral’ rating and a price target of $20.58.
However, Goldman is bullish on both NAB and Westpac Banking Corp (ASX: WBC). In regards to Westpac, Goldman is approving of the bank’s recent decision to sell its insurance arm to Allianz for $725 million, which it views as “entirely consistent” with Wetpac’s goals of exiting “non-core activities”. It has a price target of $20.34 on Westpac shares.
But Goldman views NAB as “our preferred major bank exposure”. Goldman states that “our view is that it will deliver better than peer revenue growth, supported by its superior management of the volume/margin trade-off,… [as well as] its investment spend which appears further progressed relative to peers allowing it to be more selective towards where resources are directed”.
Goldman has a price target of $22.96 on NAB shares at the current time.
However, Goldman also issues a caveat. The broker says that, ” we… believe that for the bank’s run to continue, it will rely on a recovery in dividends and a re-rating of yields, in light of very low interest rates.”
Something for ASX bank investors to keep in mind!
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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.
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