The Westpac Banking Corp (ASX: WBC) share price was out of form in February.

Over the course of the month, Westpac's shares lost 5.7% of their value.

However, that is only telling half the story.

After roaring higher and higher for the past 12 months, the banking giant's shares hit a multi-year high of $35.27 in the middle of February before sinking deep into the red.

This means that from its high, the Westpac share price was down almost 10%.

But why did this happen? Let's see what caused investors to hit the sell button in February.

Why did the Westpac share price crash in February?

The catalyst for the selling was the release of Australia's oldest bank's first quarter update.

That update failed to demonstrate why Westpac shares deserved to be smashing the market over the past 12 months and trading on significantly higher than average multiples.

For the three months ended 31 December, Westpac revealed that its net interest income fell 6% for including notable items but rose 1% excluding them. Non-interest income was up 9% excluding notable items thanks to higher financial market revenue.

On the bottom line, Westpac recorded an unaudited net profit of $1.7 billion during the quarter. Whereas excluding notable items, the big four bank posted a net profit of $1.9 billion. This represents a 3% increase on the quarterly average during the second half of FY 2024.

The key metric that a lot of investors watch is the net interest margin (NIM). Westpac revealed that its core NIM was down 2 basis points to 1.81%.

Management notes that a provision release in second half of FY 2024 contributed 1 basis point to the margin decline. The balance relates to ongoing mortgage competition and further deposit mix shift towards lower spread savings and term deposits.

Combined with a series of underwhelming results from the rest of the banks, this appears to have led to some investors locking in their gains and rotating out of the sector.

Should you invest?

Despite February's weakness, the broker community largely believes that the Westpac share price remains overvalued.

For example, in response to its quarterly update, Macquarie, Morgan Stanley, and Ord Minnett have all put the equivalent of sell ratings on its shares with price targets of $28.00, $29.20, and $27.00, respectively. This implies potential downside of approximately 8% to 15%.

The outlier is UBS which reaffirmed its buy rating with a lofty $40.00 price target.