The Westpac Banking Corp (ASX: WBC) share price has slumped 29.1% lower in 2020 to $17.16 per share. It’s far from alone as ASX bank shares have been hit hard by the fallout from the coronavirus pandemic. But, the tide could be starting to turn for the Westpac share price. The company has just copped the biggest corporate fine in Australian history for its AUSTRAC breaches.
Despite some uncertainty at the moment, I still think the Westpac share price could be in the buy zone for long-term investors.
Why the Westpac share price could be in the buy zone
For starters, Westpac has now got some certainty around the AUSTRAC penalty. The bank will pay a $1.3 billion fine for the many breaches of anti-money laundering/counter-terrorism financing (AML/CTF) laws.
Obviously that’s not good for shareholders in the short term but it does reduce the unknowns going forward.
Secondly, the Reserve Bank of Australia (RBA) is continuing to inject cash into the economy. That’s increasing liquidity and helping tilt the competitive advantage back towards the big four banks.
The RBA has set up a number of facilities to help keep businesses afloat and maintain lending throughout COVID-19. However, the big four banks like Westpac can afford to lend for low rates and squeeze their competitors like Bendigo and Adelaide Bank Ltd (ASX: BEN).
The Westpac share price has still underperformed the S&P/ASX 200 Index (ASX: XJO). That means many investors will understandably not be bullish on buying right now.
However, I think there could be an opportunity ahead of the bank’s full-year earnings update on 2 November.
The Westpac share price is currently trading at 12.9x earnings with a 10.1% dividend yield. That dividend may well drop on the back of APRA’s recommendation to reduce dividends and the $1.3 billion AUSTRAC fine.
However, I still think the medium to long-term outlook is strong for Westpac. That means I’ll be looking hard at whether or not to add the bank to my portfolio in 2021.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. 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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