New Era for Global Banking

06/11/2015 10:00 am EST

Focus: GLOBAL

Richard Stavros

Analyst, Global Income Edge, Utility Forecaster and Personal Finance

The global banking sector is on the threshold of a new era; stiffer financial regulations will make them less risky and a wave of technologies will cut costs, suggests Richard Stavros, editor of Global Income Edge.

The weaker institutions are being forced to withdraw from the global stage, which in turn is creating new opportunities for the survivors to become bigger and stronger.

As a result, the stage is set for the top global performers that are left to win market share, increase profits, and deliver fatter dividends.

HSBC (HSBC) recently announced that it might move its headquarters back to Hong Kong, where the firm started in 1865. This would be a great development.

One of the world’s largest banks, HSBC has been repositioning, withdrawing from retail banking in Brazil and Turkey.

Asia contributed 78% of profits last year and it is wisely deciding to concentrate there more. Offering a dividend yield of 5.19%, HSBC is a buy up to $55.

Banco Santander (SAN) has been dominant in Latin America, another of the world’s great emerging markets, while benefiting from an improvement in its home European market.

Santander recently reported that its earnings in Spain jumped 42% in the first quarter. In Britain, the bank’s profit rose 27%. And operations in Latin America saw profits increase by 28.5%.

It’s clear that the reforms instituted by the recently installed chairwoman, Ana Botín, are paying off. With a dividend yield of 9.25%, SAN is a buy up to $10.

Among the strong regional banks in high-growth countries is Westpac Banking Corp. (WBK)—Australia’s oldest bank—which is expanding into Asia.

We’ve been impressed with the bank’s ability to weather Australia’s recent economic downturn and the fact that the bank has continued to be profitable in the wake of Australia’s commodity-market collapse. With a dividend yield of 5.89%, WBK is a buy at $34.

Brazil's third largest bank, Banco Bradesco (BBD) has been able to weather the storms in its home country better than most.

As a growing number of Brazilians have accumulated savings, the bank’s total deposits rose from around $25 billion at the beginning of the last decade to nearly $150 billion today.

As Brazil improves, we believe the bank will capture more profits. With a 4.44% yield, BBD is a buy up to $14.

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