The Zacks Analyst Blog Highlights:Australia & New Zealand Banking Group, National Australia Bank, Westpac Banking, Goldman Sachs

   The Zacks Analyst Blog Highlights:Australia & New Zealand Banking Group,
 National Australia Bank, Westpac Banking, Goldman Sachs Group and Ocean Rig

PR Newswire

CHICAGO, July 2, 2013

CHICAGO, July 2, 2013 /PRNewswire/ announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include Australia & New Zealand Banking
Group Limited (OTC:ANZBY-Free Report), National Australia Bank Limited
(OTC:NABZY-Free Report), Westpac Banking Corporation (NYSE:WBK-Free Report),
Goldman Sachs Group, Inc. (NYSE:GS-Free Report) and Ocean Rig UDW Inc.
(Nasdaq:ORIG-Free Report).


Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of
the Day pick for free.

Here are highlights from Monday's Analyst Blog:

Banks Down-Under Looking Up

The banking sector was historically the darling of investors, with stocks
offering steady income and high secured yields universally. However, the 2008
Global Financial Crisis laid bare the risky dealings by individual banks and
the lack of regulatory oversight made leeway for such practices. Or, as Warren
Buffett put it, "You only find out who is swimming naked when the tide goes

In the melee that ensued, Australian Banks, with their stringent regulations
and traditionalist lending ways, turned from being the narrow-minded cousins
(for opposing risky businesses) to the poster boys of fiscal dependability.
Since Dec 2012 -- 4 years since the crisis set in -- 4 of Australia's biggest
banks, Australia & New Zealand Banking Group Limited (OTC:ANZBY-Free Report),
Commonwealth Bank of Australia, National Australia Bank Limited
(OTC:NABZY-Free Report) and Westpac Banking Corporation (NYSE:WBK-Free Report)
still carry a Standard & Poor rating of "AA-" and are among the top 50
dividend payers listed around the globe.

The AU banks likely learned lessons from the top U.S. banks. The Aussies
managed to bring radical changes in funding sources, reinforce balance sheets,
lower risky assets and post healthy earnings. The reinforcement of investor
confidence was a natural outcome.

Down Under is the Stop

Investors hunting the globe for yield would be prudent to stop in Australia,
which has a dividend yield just more than 5%, the highest in major global
equity markets. Further, apart from reporting rising earnings over the last
decade, the Aussie banks also boast the best risk-adjusted returns and highest
dividend yields.

The Big Four down-under – Australia & New Zealand Banking Group, Commonwealth
Bank of Australia, National Australia Bank Limited and Westpac – currently
disburse dividends between $4.0 billion and $5.4 billion annually, earning
their place among the top 10 international banks. The average yield for these
banks is roughly 6.4%.

Notably, in a booming economy with more than 2 decades of almost no domestic
recession, Commonwealth Bank's market value has exceeded that of the U.S.
biggies like The Goldman Sachs Group, Inc. (NYSE:GS-Free Report).
Australia's fairytale returns are mainly attributable to domestic economic
stability. Not only does the Aussie government have little debt, the country
enjoys healthy macroeconomic growth and a bright earnings outlook. The
Telecom, Utilities and REIT industries have consistently been the key growth
drivers in the past few years.

Recession? What Recession?

Since 1991, the Australian economy has functioned without any major economic
downturn, an achievement unrivalled by any other highly developed nation.
Further, the AU regulatory authority – The Reserve Bank of Australia –
maintained the highest inflation rates among the developed countries to keep
away inflation.

However, the global financial crisis did have it impact on the Aussie banking
sector. After climbing to a record high in Nov 2007, Commonwealth Bank's
shares plunged almost 61% within 14 months as asset values deteriorated.
Moreover, a decline in asset quality through 2008 resulted in the slowed
earnings growth at Commonwealth in 4 years.

However, most of these banks have bounced back. Australia & New Zealand
Banking Group, Westpac and Commonwealth clocked record profits in the first
five months of 2013. Further, higher dividend payout ratios and low bad debts
stimulated a 10% gain in Australian bank shares through the end of May. This
lured many overseas investors after bond yields sank in a gloomy macro

Yields Look Attractive: Is There a Hidden Downside?

Westpac, Australia's second-largest bank in terms of market value pays almost
85% of its earnings to shareholders through dividends. Commonwealth Bank has a
dividend payout ratio of roughly 75%. However, any sort of elevation in bad
debts would weigh heavily on profits.

Even without an economic crisis or drop in the housing market boom, earnings
growth is under pressure. The biggest challenge for the Aussie lenders is
growing revenues in a still muted global economy.

Australia's recession-free status prompted consumers and businesses to borrow
greatly. Household debt is around 150% of disposable income, at almost similar
levels to Canada but much higher than the U.S. Additionally, home prices in
the island country are overvalued by almost 70%.


However, the tale of long-term growth for the banking sector is presently on
edge. Banks look overpriced, but that's sustainable by low interest rates and
extraordinary quantitative moderation in various parts of the world. As long
as these continue, Aussie banks will prevail with healthy dividend yields. But
the economy always in a state of flux, nobody can predict for how long.

Strong Buy on Ocean Rig

Zacks Investment Research upgraded Ocean Rig UDW Inc. (Nasdaq:ORIG-Free
Report) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?

The ultra deep water rig provider delivered positive earnings surprises in two
out of the last three quarters with an average beat of 45.6%. Ocean Rig has
witnessed an upward revision in earnings estimates on the back of strong first
quarter results.

Ocean Rig's first quarter 2013 earnings per share came in at 5 cents,
surpassing the Zacks Consensus Estimate by 122.7%. Total revenue at the end of
the first quarter was $246.4 million, surpassing the year-ago results by 51.2%
and the Zacks Consensus Estimate of $221 million by 12.1%. 

A key positive for the company is the promising outlook on the ultra deep
water drilling industry. Ocean Rig signed nearly 20 new contracts or
extensions year to date, excluding the exercise of existing options. The
company's current backlog of $4.9 billion indicates that major oil and gas
companies will have to depend on Ocean Rig for the supply of rigs for
heightened deepwater exploration.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of
the Day pick for free.

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