With the ASX having risen by just 2% in 2014, it’s been something of a disappointing year for Aussie investors.
As a result, confidence is not particularly high. Indeed, the future direction of Australia’s leading share index looks as difficult to call as ever.
However, there are companies that have strong prospects for next year and, as such, they could be well-worth buying right now. Here are three banks that appear to fall into that category, despite their fortunes in 2014 having been rather mixed.
Westpac Banking Corp
Of course, the big news when it comes to Westpac Banking Corp (ASX: WBC) is that CEO, Gail Kelly, will step down in February 2015 to be replaced by the bank’s Australian financial services chief executive, Brian Hartzer. Since Kelly took the helm in February 2008, shares in Westpac have risen by 25% and the bank now appears to be in a much stronger position than prior to her tenure.
Looking ahead, Westpac could become much more in-demand in 2015. That’s because its fully franked yield of 5.6% may attract yield-hunting investors as a result of continued ultra-loose monetary policy. It’s also notable that shares in Westpac trade at a discount to the wider market (they have a P/E ratio of 13.4 versus 15.6 for the ASX), so there seems to be scope for an upward rerating over the course of the next year.
Commonwealth Bank of Australia
When it comes to share price performance since February 2008, Commonwealth Bank of Australia (ASX: CBA) takes some beating. That’s because its shares have risen by a whopping 52% and there could be more gains ahead in 2015.
Indeed, CBA is expected to post annualised earnings growth of 5.9% over the next two years, with dividends per share set to grow at a similarly impressive 5.3% per annum over the same time period. This means that CBA could be yielding as much as 5.4% (fully franked) in FY 2016 (assuming a constant share price).
Furthermore, with CBA having a dominant position in the Australian mortgage market, it could stand to benefit from continued low rates. This could cause its bottom line to surprise on the upside and push shares in the bank to even higher highs.
National Australia Bank Ltd.
With a fully franked dividend yield of 6.2%, it’s clear to see why National Australia Bank Ltd. (ASX: NAB) appeals to a relatively large number of Aussie investors. Of course, its yield has been aided by a share price that has fallen during 2014 by 6%, but improved performance could be on the horizon.
Indeed, potential catalysts for NAB could be the sale of international assets, with the divestment of its US operations seemingly a step towards a renewed focus on Australia. This approach could turn out to be a sound move, since NAB continues to have an enviable position in the domestic lending market and, as such, could be a major beneficiary of further low interest rates.
With shares trading on a P/E ratio of 14.8 but being forecast to deliver earnings growth of 16.6% per annum over the next two years, the bank’s PEG ratio of 0.9 continues to indicate growth at a reasonable price. As such, they could perform strongly in 2015.
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Motley Fool contributor Peter Stephens does not own shares in any of the companies mentioned.
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