In an effort to gain from rising demand for assets,
The Goldman Sachs Group, Inc.
) is expanding its fixed income business in Australia. Goldman
intends to make its Sydney division a global center for dealing
in the high-yielding bonds of the country.
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Goldman plans to add approximately 10 staff members to its unit
in Sydney, representing a 50% hike from the current levels. The
U.S. banking giant has already started the hiring process.
The expansion method involves sales and trading of government and
corporate bonds of Australia, along with some interest income
generating products. The company has set up a specialist sales
desk to serve offshore investors including hedge funds, sovereign
wealth funds as well as central banks.
Australian dollar-denominated assets have high global demand.
Recently, foreign holdings of Australian debt have stayed close
to record highs. The Swiss and Russian central banks and others
foreign banks have expanded profoundly in Australia as Europe's
debt crisis has worsened. Further, Australian bonds offer an
alternative to the low rate financial products globally.
However, Goldman will face tough competition from
Deutsche Bank AG
) which dominates the trading business and is nicknamed by many
as the "Flows Monster."
We believe the planned expansion of Goldman would substantially
augment fixed income business revenues and partially mitigate the
impact of a low interest rate environment that the bank has been
facing in most countries throughout the world.
Goldman currently carries a Zacks Rank #3 (Hold). Other banking
stocks that are performing better include
Duff & Phelps Corporation
EverBank Financial Corp.
). Both these carry a Zacks Rank #1 (Strong Buy).