Home Sports That’s why I’d pick Macquarie (ASX:MQG) over other ASX 200 banks

That’s why I’d pick Macquarie (ASX:MQG) over other ASX 200 banks


I think that Macquarie Group Ltd (ASX: MQG) shares are a much more attractive investment idea than others ASX 200 (ASX: XJO) bank shares.

Macquarie is one of the largest companies on the ASX. It is almost as big as some of the biggest banks Australia and New Zealand Banking Group Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Commonwealth Bank of Australia (ASX: CBA).

Looking at the different banks, I think Macquarie will be the clear winner to enter the portfolio.

Why I like Macquarie shares

What I like about the global investment bank compared to other banks is that it is much more diverse in its operations.

CBA, NAB, Westpac and ANZ mainly profit from lending. A significant proportion of this lending is for the mortgage needs of Australian (and New Zealand) households. The real estate market has been very good over the past decade, which has been a very helpful tailwind. However, it seems a bit risky for the big banks to keep almost all their eggs in one basket.

Macquarie does have a banking division, one of the largest outside of the big four. It could benefit from rising interest margins as central banks raise interest rates to fight inflation. Macquarie’s lending has grown strongly over the past couple of years.

However, I like that Macquarie is able to make a profit with all the other divisions.

It has a huge asset management department. As of June 30, 2022, assets under management (AUM) were $773.9 billion. The great thing about this is that it creates consistent management fees, ensuring a stable income.

Macquarie also has Macquarie Capital, part of the “investment bank” business. Although the returns here can be variable, this gives Macquarie diversification of returns by salary type and geographically.

Another segment is called Commodities and Global Markets (CGM). Again, returns can be volatile here, but Macquarie can profit from different parts of the world’s markets.

Impressively, the company recently reported that its revenues rose again in the first quarter of FY23, which means it outperforms a number of other investment banks that believe things are getting tougher in the current environment. I appreciate that the bank is also conservative with its balance sheet in the current environment.

Final thoughts

Looking at Macquarie’s current share price, it is valued at 16 times FY23 earnings estimates and 15 times FY24 earnings estimates. It’s not exactly cheap, even if Macquarie shares are down almost 20% in 2022.

However, I think the diversification Macquarie shares offer and the growth it can achieve over the years makes it a better choice compared to the other ASX 200 majors bank shares.


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