CIMB is expecting the ANZ Banking Group to outperform its big 4 peers as the US Federal Reserve starts tapering down its quantitative easing measures.
Here’s what CIMB analysts say:
“ANZ’s bias towards Asian and Institutional business means it should gain far more than peers from the Fed’s decision to start a ‘tapering’ its QE. ANZ’s FY14-15F NPAT should benefit from higher US bond yields, wider credit spreads and a lower AUD/USD.
In the longer term, higher US short-term rates should also boost ANZ’s Asian earnings. Lower USD interest rates and the rising USD/AUD have been a drag on ANZ’s Asian earnings.
We think these trends are set to reverse and believe ANZ will benefit from the Federal Reserve’s changes at the long end of the yield curve through multiple channels such as currency translation, Asian capital earnings, loan spreads and more.
We estimate this theme could drive additional revenue of around A$350m for ANZ by FY15, and we upgrade our FY14 and FY15 cash EPS forecasts by 1.1% and 2.5% respectively. Upgrade to Outperform.”
The analysts expect the Fed to taper its QE in accordance with the performance of the US’ economic momentum and unemployment rate. CIMB expects economic momentum to strengthen in late 2013 and the Fed to act in the 4Q13-1Q14.
CIMB’s newest research note puts ANZ in the lead, followed by NAB (neutral), Westpac (underperform) and CommBank (underperform).
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