After Australia & New Zealand Banking Group Ltd’s (ASX: ANZ, OTC: ANEWF, ADR: ANZBY) blockbuster earnings, the other members of Australian banking’s Big Four may consider revisiting their relative insularity.

That’s because ANZ Bank’s aggressive push into Asia helped deliver an 11 percent year-over-year surge in earnings, which fueled a 14 percent jump in the firm’s dividend. The bank’s interim dividend is a fully franked AUD0.83 per share, with an ex-date of May 9 and a payment date of July 1.

Unlike its peers Commonwealth Bank of Australia Ltd (ASX: CBA, OTC: CBAUF), National Australia Bank Ltd (ASX: NAB, OTC: NAUBF) and Westpac Banking Corp Ltd (ASX: WBC, NYSE: WBK), which have been largely content to dominate the domestic market, ANZ has adopted a super-regional strategy whereby it hopes to augment core earnings from its home market with the hyper-growth from nearby Asian markets.

In fact, this strategy is what originally won CEO Michael Smith his current post. Back in 2007, Mr. Smith, who was with HSBC at the time, gave a presentation on how he would grow ANZ across Asia, transforming it into an entity that would rival his then-current employer. ANZ’s board was so impressed, they hired him as CEO.

Of course, this strategy has encountered considerable skepticism, particularly as its rollout has been more challenging than expected, with the timeline for profit targets extended, as international results fell short of ambitious projections. The new goal is for ANZ’s Asia Pacific, Europe and America (APEA) segment to deliver 30 percent of the bank’s profits by 2017.

Analysts believe the customarily cautious bank will have to pursue more bolt-on acquisitions to achieve this new target. The bank did go on a bit of an acquisition spree in the Asia-Pacific region in 2009-10, though the extremely disciplined acquirer has largely kept its powder dry since then, despite a number of other high-profile opportunities.

For fiscal-year 2013 (ended Sept. 30), the APEA segment accounted for 15.6 percent of cash profit, or AUD1.015 billion, its share declining nine-tenths of a percentage point from the prior year. For the first half of fiscal 2014 (ended March 31), by contrast, cash profit from the APEA division was up 48.4 percent from the prior-year period, to AUD681 million. That amounts to 19.4 percent of the bank’s overall cash profit, an improvement of 1.9 percentage points from the prior year.

Management observed that its international business, particularly in Asia, is “firing on all cylinders” due to significant growth in customers, products and investment flows. Furthermore, Mr. Smith noted, “Since we launched our strategy six years ago, the compound annual growth rate in earnings from Asia has been 37 percent, and ANZ is now being consistently rated a top 4 corporate bank in Asia by Greenwich Associates.”

One of the key sources of the bank’s Asian profit growth was its Global Markets business, which provides services in areas such as commodities and foreign exchange. Income from customer services in Asia, particularly foreign exchange, increased by 34 percent.

Despite these promising results, ANZ does not publish its return on equity from its Asian operations, so it’s difficult for analysts to compare returns from its investment in Asia to the returns it typically generates at home. Presumably, that means its Australian business is still delivering better results in this area than its Asia-Pacific operations.

In the past, analysts have leveled substantial criticism toward the bank’s foray into Asia. In a three-part report last October, for instance, JP Morgan said ANZ’s returns had lagged its domestic-focused peers over the preceding six-year period, observing that the supposedly growthier APEA division’s earnings were essentially treading water, even though the segment’s capital base had grown significantly.

What might be different now? Perhaps the segment is benefitting from the recent decline in the exchange rate. The APEA division reports its earnings in US dollars, and the Australian dollar traded at an average of USD0.9125 during the half-year period, down 12.1 percent from the prior-year period’s average.

The bank does hedge some of its currency exposure, though there was still a positive 9.7 percent difference in APEA earnings when results were translated back into Australian dollars.

Mr. Smith has frequently argued that Asia’s higher growth rates are a better long-term bet than the superior returns that Australian operations will yield in the short term. Regardless of its growing pains, ANZ’s overall return on assets remained steady at 15.5 percent.

And in a period during which the aussie is expected to enter a protracted decline, perhaps the bank’s super-regional strategy has benefits beyond the heady growth expected from Asian markets.

The Domestic Front

Of course, we’ve given short shrift to the bank’s domestic operations, which continue to deliver the vast majority of profits. Rate-sensitive sectors such as real estate have been big beneficiaries of historically low interest rates, as have the institutions that provide all the financing.

ANZ’s mortgage lending has grown faster than its peers for the past 14 quarters, and branch home loan sales increased 16 percent during the year. The bank currently has a 15 percent share of the country’s mortgage market.

Its bottom line was also boosted by lower provisions for bad debts, which continued to fall and are expected to remain low as borrowers benefit from record-low interest rates.

In Australia overall, ANZ’s profits increased 5 percent from a year ago, to AUD1.48 billion, while domestic lending and deposits were up 6 percent and 7 percent, respectively.

Of course, with three well-capitalized peers, competition on the home front has been intense, causing net interest margins to decline by 4 basis points, to 2.15 percent.

Beyond that, one industry-wide challenge has been the anemic growth in business lending. Continuing uncertainty in the global economy has left businesses hoarding cash and fearful of squandering money on growth investments that turn out to be for naught.

Still, ANZ’s strong domestic results could augur well for the rest of its Big Four peers, particularly those that have an even greater exposure to mortgage lending. But even if the banks post positive results, based on their consensus target prices, analysts seem to believe they’re fully valued at present.

While most analysts are likely still digesting ANZ’s earnings, for now the bank’s mix of analyst sentiment remains bullish with a strong neutral weighting, at 10 “buys,” eight “holds,” and two “sells.” The consensus 12-month target price is AUD34.34, which suggests potential appreciation of just 0.8 percent above the current share price.

With a net yield of 4.8 percent, ANZ Bank is a buy below USD34 in the Conservative Portfolio.

Westpac has 24.8 percent of Australia’s mortgage market. The bank is scheduled to report its fiscal 2014 first-half (ended March 31) earnings on May 5.

Analysts forecast adjusted earnings per share will grow 8 percent year over year, to AUD1.17, while revenue is projected to grow 7 percent, to AUD9.78 billion.

The bank’s current mix of analyst sentiment is neutral with a slightly bullish tilt, at five “buys,” 12 “holds,” and three “sells.” The consensus 12-month target price is AUD34.09, which is actually 1.8 percent below the current share price.

With a net yield of 5.6 percent, Westpac is a buy below USD30 in our How They Rate coverage universe.

Commonwealth Bank of Australia has a 27 percent share of the country’s mortgage market. The bank is expected to report its fiscal 2014 second-half (ending June 30) earnings in mid-August.

Analysts forecast adjusted earnings per share will tick up 1 percent year over year, to AUD2.61, while revenue is projected to grow 2 percent, to AUD11.28 billion.

The bank’s current mix of analyst sentiment is largely neutral with a slightly bearish tilt, at five “buys,” eight “holds,” and six “sells.” The consensus 12-month target price is AUD77.14, which is actually 1.9 percent below the current share price.

With a net yield of 4.8 percent, CBA is a buy below USD72 in our How They Rate coverage universe.

National Australia Bank has a 16.5 percent share of Australia’s mortgage market. The bank is scheduled to report its fiscal 2014 first-half (ended March 31) earnings on May 8.

Analysts forecast adjusted earnings per share will grow 7 percent year over year, to AUD1.33, while revenue is projected to grow 7 percent, to AUD9.46 billion.

The bank’s current mix of analyst sentiment is bullish with a strong neutral tilt, at nine “buys,” eight “holds,” and three “sells.” The consensus 12-month target price is AUD36.24, which suggests potential appreciation of 4.4 percent above the current share price.

With a net yield of 5.5 percent, NAB is a buy below USD30 in our How They Rate coverage universe.