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Should you buy Australia and New Zealand Banking Group?

Shares in Australia and New Zealand Banking Group (ASX: ANZ) are nudging their all-time high of $35.07, achieved in April this year. Up 25% in the past year alone, ANZ is fast becoming the bank stock everyone wants to own.

Unlike his peers, CEO Mike Smith saw the opportunities of the Asian Century more than eight years ago, when the ambitious banker put ANZ’s Super Regional Strategy on the drawing board. Despite having to defend the strategy on numerous occasions, it appears he has got it right.

The regional bank’s 2014 half-year cash profit might only have been 11% up on the prior period, compared to Commonwealth Bank of Australia’s (ASX: CBA) thumping 14% increase, but it’s the significant offshore growth which should have long-term investors excited.

Our two biggest banks, CBA and Westpac Banking Corp (ASX: WBC), have nearly 50% market share of Australian mortgages and remain focused on the domestic economy, this has enabled them to benefit from rising property prices and an ability to consolidate the market by acquiring smaller institutions. However with increasing competition, regulation and funding pressure, the bumper earnings growth these two banks have experienced in the past decade will be difficult to continue in coming years.

In comparison ANZ is estimated to hold just 14% of the home loan market and generated over 19% of FX-Adjusted cash earnings from its Asia, Pacific, Europe and Americas markets. Led by the International and Institutional Bank which grew earnings 14% in 1H14, its foreign exposure will differentiate it from its domestically focused peers.

To buy, or not

ANZ continues to present a compelling investment case and, using Morningstar’s forecast earnings per share for 2014, trades on a forward price-to-earnings ratio of 13.2 and dividend yield of 5.2%. However the big banks’ rapid share price rises, which have resulted in the wake of a lower interest rate environment, makes one wonder if investors will get a better buying opportunity when interest rates and bad debts start to rise.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.