Australia’s fifth-largest home lender takes the good with the bad as home loan book surges to new highs
It’s been a day of ups and downs for Australia’s fifth-largest mortgage lender.
Macquarie Group may be licking its wounds following today’s $100 million capital add-on news, but there is plenty to celebrate too.
Its home loan book has passed a new landmark, as the broker-led lender keeps growing far faster than the major banks, although it is paying for that growth with thinner margins.
Home loans in Macquarie’s Banking and Financial Services (BFS) division reached $200 billion as at 30 September, up 9% from $183 billion in March and 24% from $161.7 billion a year earlier. The pace outstrips the wider market, where system housing credit is growing at 7% year on year.
Mortgage brokers remain the engine of that growth, with more than 95% of Macquarie’s home loans originated through the broker channel.
That model sets Macquarie apart from the majors. Westpac this week reported proprietary share of new home loans to 36%, and NAB said its bankers now originate half of its new home loans.
Macquarie Group managing director and outgoing chief executive Shemara Wikramanayake delivered her last result before retiring today. “The strength of the result reflects the diversity of our businesses, the depth of our expertise to navigate less certain market conditions and our teams’ ability to identify opportunities and deliver for our clients,” she said.
Growth in home loans drove the group’s balance sheet higher over the half. Total loan assets rose 8% to $272.7 billion, which Macquarie attributed to volume growth in BFS home loans.
Deposits kept pace. BFS deposits rose 10% over the half to $236.2 billion, up 23% on a year earlier. That figure includes home loan offset accounts. Group deposits of $244.2 billion now make up 53% of Macquarie’s total funding.
Wendy Brown (pictured), head of home loan and commercial broker sales, reflected on a rapidly evolving lending market.
“We’ve seen plenty of change in the market over the past year, with customers taking a much closer look at their finances, reassessing their home loan options and considering whether refinancing could make sense for them. Brokers are often at the centre of those conversations, helping customers understand their options and navigate what can be a complex process,” she told MPA following publication of today’s results.
“As we grow, it’s really important for us that we don’t compromise on what sets us apart. That’s why we’re focused on the fundamentals. We’re investing to scale our teams and streamlining our processes so we can maintain our market-leading turnaround times. We’ve been growing our locally-based credit and BDM teams and also continuing to enhance our digital platforms.”
Mortgage margins narrow
The volume came at a price. BFS net interest and trading income rose 12% to $1.6 billion. Macquarie said that was driven by 22% growth in the average loan portfolio and 24% growth in average deposits. Both growth rates are measured net of offset accounts.
Lower margins partially offset those gains, with the bank putting the squeeze down to “changes in portfolio mix and ongoing lending and deposit competition”, although it didn’t specify the extent of the margin compression in the report.
Credit costs also rose. BFS net credit and other impairment charges jumped to $77 million from $24 million a year earlier. Macquarie said this was driven by changes in the Australian macroeconomic outlook, partially offset by the sale of its car loans portfolio.
Costs climbed alongside the book. BFS operating expenses rose 7% to $1 billion. Employment expenses were up 18%, reflecting wage inflation and the extra staff needed to support portfolio growth. BFS headcount outside technology rose 11% year on year to 2,944.
BFS still lifted its net profit contribution 6% to $841 million. Group net profit after tax was just shy of $2.5 billion, up 50% on the prior corresponding half. That jump came largely from the Commodities and Global Markets division and from the gain on Macquarie’s sale of Macquarie AirFinance.
Cautious outlook as rates climb
Incoming chief executive Greg Ward said Macquarie would keep a cautious stance, with a conservative approach to capital, funding and liquidity. He named the factors that could shape its short-term outlook, including:
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global economic conditions
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inflation and interest rates
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volatility events
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potential tax or regulatory changes
The result landed in the same week the RBA lifted the cash rate to 4.85%, its highest since 2008.
Despite the caution, Brown was upbeat on what’s to come. “We’ve got some great new tools and policy changes in the pipeline that build on what we’ve already delivered,” she said. “We’ll be rolling these out over the coming weeks and months and we’re confident brokers and their customers are going to love what we’ve been working on.”
