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Bank profits to grow

With more pressure expected to be applied to push the Australian dollar even further down, the earnings of Australia’s big four banks are expected to increase by hundreds of millions of dollars next year, according to The Australian Financial Review.

In the last few months, the Aussie dollar has fallen by over 10% compared to overseas currencies, such as the US dollar or British pound. Whilst ANZ (ASX: ANZ) would likely be the biggest beneficiary of the falling currency, Westpac (ASX: WBC), Commonwealth Bank (ASX: CBA) and NAB (ASX: NAB) are also expected to receive a healthy boost.

Last week, the aforementioned banks were labeled as more profitable than banks in 10 other developed economies, and with the falling dollar, UBS analyst Jonathan Mott has increased his profit forecast for the big four by a combined $223 million.

Westpac is forecast to clear $28 million, whilst ANZ would be the beneficiary of an incredible $133 million. ANZ is the most likely beneficiary due to its heavier involvement in international markets, with the aim of becoming a ‘super regional’ bank in Asia.

Foolish takeaway

The banks have given investors outstanding returns over the last 12 months, but have fallen away in recent weeks as investors have realised their excessive valuation and taken profits. Whilst ANZ stands the best chance of benefiting from the falling currency, the other banks are all still well-overpriced at current levels.

Instead, it might be worth looking at other high-yielding companies. The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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