Shares in the banking giants are sitting near all-time highs and paying as big a dividend as ever. In the current low interest rate environment they're a genuine contender for new money entering the local stockmarket despite their lofty valuations.
Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd. (ASX: NAB) and Westpac Banking Corp (ASX: WBC) are prime candidates for this new money, thanks to their juicy fully franked dividend yields and strong brand names. Coupled with a history of successfully growing earnings and dividends, now seems a better time than ever to get on board the big banks' bandwagon.
However to be truly successful in the stockmarket you need to look beyond the past and current earnings and dividend yields to focus on the future. Here's what I think you can expect from these three S&P/ASX 200 (ASX: XJO) (INDEX: ^AXJO) giants in coming years.
Westpac
As Westpac moves forward it'll look to increase its exposure to Asian markets, superannuation and wealth management products through its numerous subsidiaries such as BT Financial. However its Asian and wealth management strategy still have a long way to run before they'll have a meaningful impact on earnings and allow it to deserve its current price tag. As such, I believe Westpac will not outperform the market from here on.
ANZ
Our biggest regional bank has a number of notable differences to Westpac. Its Asian expansion dubbed, The Super Regional Strategy was formulated back in 2007. Since then it has grown to account for over 19% of FX-adjusted cash earnings. Closer to home, ANZ's growing its mortgage portfolio quicker than any of its peers. Although I don't believe it's a bargain at its current price, it could prove to be a smart investment many years from now, given its high dividend yield and the likelihood of increased earnings. However, for now, I'm waiting patiently on the sidelines.
NAB
Our fourth largest bank could be the dark horse of the Australian banking scene given the economic recovery currently underway in the UK. However, with poor profitability in local markets and a portfolio of bad debts hanging around like a bad smell, I don't think now is the best time to buy NAB shares, despite a 5.9% fully franked dividend.
