Westpac (ASX:WBC) share price hits 4-month low. Is it time to buy the ASX bank?

Is the Westpac Banking Corp (ASX: WBC) share price a buy today, or should you leave Westpac shares alone in their penalty box?

| More on:
falling asx share price represented by business man giving thumbs down gesture

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Foolish takeaway

All in all, Westpac is not a company I would consider buying today or at any time in the foreseeable future. There are simply better options out there in my view, for both growth and income.

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.

More on Bank Shares

A businessman slips and spills his coffee.
Bank Shares

Why is the CBA share price taking a tumble on Wednesday?

CBA shares are taking a fall today. Let’s find out why.

Read more »

A woman puts up her hands and looks confused while sitting at her computer.
Bank Shares

Why are ANZ shares tumbling 4% on Wednesday?

What’s going on with the big four bank’s shares today? Let’s find out why they are falling.

Read more »

A woman wearing yellow smiles and drinks coffee while on laptop.
Earnings Results

CBA shares on watch after delivering $2.5b quarterly profit

The banking giant has made a big quarterly profit. But will it be enough for the market?

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Bank Shares

3 reasons to sell NAB shares in November

Don’t bank on NAB shares rising from here, according to two experts.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Bank Shares

Why are NAB shares tumbling from their 17-year high?

The big four bank's shares have run out of steam. But why?

Read more »

Bank building with the word bank in gold.
Bank Shares

How long can ASX 200 bank shares keep smashing out new highs?

The ASX 200 Banks Index closed at a new all-time high yesterday.

Read more »

A woman's hair is blown back and her face is in shock at this big news.
Bank Shares

$150 a pop: Would I still buy CBA shares as they hit all-time highs?

Here's my take on CBA shares at $150...

Read more »

Friends at an ATM looking sad.
Bank Shares

Are ANZ shares a buy following the bank's latest results?

This broker has changed its mind following ANZ's earnings...

Read more »