DUF Duff & Phelps Corp. Class A

In an effort to gain from rising demand for assets, The Goldman Sachs Group, Inc. (GS) 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.

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 (DB) 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 (DUF) and EverBank Financial Corp. (EVER). Both these carry a Zacks Rank #1 (Strong Buy).

 
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