Macquarie Group Ltd (ASX: MQG), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) have proven to be great stocks to buy and hold over the last few years. Since the beginning of 2014, the banks' share prices are trading well above the return from the S&P/ASX 200 (ASX: XJO) (INDEX: ^AXJO).
Maybe investors are finally convinced low interest rates are here to stay and are piling into high yielding stocks? Or maybe the banks are growing more rapidly than first anticipated and worthy of their high share prices? Here's what I think investors can expect from these stocks.
ANZ
With a keen focus on Asian markets, ANZ's Super Regional Strategy is finally taking off. I believe investors are now realising the potential for the bank to grow cash earnings from the region and looking to position their portfolios to benefit. Whilst the Commonwealth Bank of Australia (ASX: CBA) posted (arguably) the most impressive 1H14 earnings result, ANZ's APEA markets (Asia, the Pacific, Europe and Americas) grew its FX-adjusted cash profit to over 19% of the group's total.
Led by the International and Institutional Banking (IIB) division, overseas earnings are likely to continue growing in coming years. However, although ANZ is likely to outperform its peers in the long term, its current share price is quite demanding.
Westpac
With 12 million customers and around 23% market share of Australian mortgages, Westpac has rewarded long-term shareholders with generous dividends and strong earnings growth. However since purchasing Lloyds Banking Group's Australian business, investors (and analysts) are wondering how the bank will continue to grow earnings. Although it is focusing on Asia and Wealth Management, analysts are expecting very modest earnings from the banking giant in the next five years. As such I believe its shares are expensive and not worth their current price.
Macquarie
Could Macquarie turn the Big Four into the Big Five? As Australia's premier investment bank, Macquarie is highly leveraged to worldwide markets and confidence. Whilst I feel its current price of around $60 per share doesn't make it a bargain, in the long term, there will be value to be found in Macquarie's shares.
A better buy than these 3
Some economists and analysts believe the low-interest rate environment will continue for some time yet, making the prospect of holding onto high-yielding dividend stocks (like these) more enticing. However, it's important to remember that no stock is a buy at any price and without earnings growth, high share prices will fall.
