After months of pessimism, support could be returning for Australian banking stocks after one prominent analyst Thursday said it is time to buy all four of the nation’s big lenders.

Citi analyst Craig Williams raised his recommendations on National Australia
Bank Ltd. (NAB), Australia and New Zealand Banking Group Ltd. (ANZ),
Commonwealth Bank of Australia (CBA.AU) and Westpac Banking Corp. (WBC) to Buy from Hold.

“With evidence continuing to mount, we now believe that the economic downturn in Australia will be less severe than we had previously anticipated. Given this, we are becoming more optimistic about the outlook for the major
Australian banks,” Williams said in a note to clients.

The more optimistic tone helped support Australian bank shares, and the
benchmark S&P/ASX 200 index.

There is increasing optimism that Australia has avoided the worst of the
global financial crisis.

Reserve Bank of Australia Governor Glenn Stevens this week said that the
downturn is less severe than many had anticipated, and lawmakers have begun warming up home and business owners for possible interest rate rises from the RBA.

Meanwhile, the nation’s key unemployment rate remains at an enviable 5.8%,
and although that is expected to continue to rise, consumer confidence remains sound amid increasing signs the nation’s economy has skirted a technical recession.

Goldman Sachs JBWere economists led by Tim Toohey said Thursday they now expect Australia’s GDP to grow by 0.5% in 2009, up from a previous estimate for 0.25% growth, with 2010 growth now seen at 3%.

All of this paints a more positive picture for the nation’s big banks, which
have been snapping up market share from their smaller rivals and offshore
banks.

Australia’s banks also avoided the worst of the subprime crisis, and bank
chiefs have been more optimistic on the economic outlook in recent weeks.

Williams said that the price and availability of capital, both debt and
equity, has improved, easing the pressure on the nation’s big banks.

An earnings recovery story is emerging, not only in Australia, but in other
key markets, and there are signs of growth worldwide, he added.

“In recent weeks there have been clearer signs that the end of the global
earnings recession is coming,” he said.

Meanwhile, property valuations in Australia, despite fears, remain relatively
resilient.