Conservative balance sheets, a stable regulatory environment, a total of zero recessions and a mining and housing boom are just some of the reasons our biggest banks have grown at a blistering pace over the past two decades.
And the proof is in the pudding.
Total shareholder returns of more than 300% for investors in our two biggest banks, namely Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC), have been witnessed since 1999.
However historical returns do not guarantee future success and the days of market-thumping returns could be behind them, especially at today's prices.
Both banks are focused almost entirely on local markets (including Australia and New Zealand) and both appear to have their backs up against the wall.
For example, the end of a mining boom is taking its toll on the economy, inflated house prices are putting pressure on the central bank to increase lending restrictions (remember, the two banks control nearly 50% of the home loan market) and unemployment is tipped to reach 6.2% in coming years.
What's more, shares in each bank currently appear expensive, despite the recent sell-off.
Australia and New Zealand Banking Group (ASX: ANZ) is the only big four bank which has taken steps to diversify its operations away from Australia and New Zealand. In fact, by 2017 CEO Mike Smith plans to generate between 25% and 30% of revenues from Asia, the Pacific, Europe and Americas (APEA) markets.
The strategy is starting to pay dividends too. Over 19% of cash profits now come from APEA markets.
And thanks to the non-stop growth of emerging economies in Asia, there are many reasons to be more bullish about ANZ than its major bank peers.
Buy, Hold, or Sell?
If investors are looking for growth over the ultra-long term, ANZ appears to be the best placed of all the majors. However, in my opinion, the most recent sell-off in bank stocks still isn't enough to justify an investment, in any of the banks.
