Is the Westpac Banking Corp (ASX: WBC) share price a buy?
Westpac Banking Corporation, more commonly known as Westpac, is one of Australia’s ‘Big Four’ banks and a financial-services provider headquartered in Sydney. It is one of Australia’s largest lenders to homeowners, investors, individuals (via credit cards and personal loans) and business. Its name is a portmanteau of “Western” and “Pacific”.
Is the Westpac share price a buy?
It has been a turbulent time for Westpac shareholders over the past year. The Royal Commission unearthed a lot of bad dealings by the banks and other financial institutions. It has led to Westpac needing to give back hundreds of millions of dollars to customers for fees that shouldn’t have been charged.
Between reporting season in August 2018 to Christmas 2018 the Westpac share price fell by more than 20%, but since then it has recovered 13%.
The release of the Royal Commission report by Commissioner Hayne seems to drawn a line for the Westpac share price. In-fact, it seemed that the banks were the least to blame by the recommendations with both the regulators and brokers under fire.
Despite the falling Australian dwelling prices and the Royal Commission, Westpac was still able to deliver a consistent quarterly cash net profit of $2.04 billion in its first quarter result of FY19.
Many market commentators believe that if Australia’s house prices keep falling, like they did by 0.7% in February 2019, then this could lead to rising bad debts. Banks are seemingly not pushing borrowers too hard if they’re in arrears, because that could lead to fire sales, which would really send house prices down.
Is Westpac a buy?
The key attraction about Westpac is its very large fully franked dividend of 7%. As long as the cash earnings per share continues to be consistent then Westpac may very well turn out to be a decent value buy today.
I will be keeping my eye on the loan arrears and bad debts. If they both rise that would be a worry.
Most of the time the worst eventuality doesn’t happen, so it is unlikely that Australia will face a GFC-like downturn. But, as long as house prices keep falling there is a danger that it affects the rest of the economy, particularly in areas like discretionary spending. With these uncertain economic conditions, I would rather go for solid ASX shares.
3 Proven ASX Shares To Consider Ahead Of Westpac
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