Macquarie Group’s banking and financial services division has long been noted for its ability to grow its mortgage portfolio and, to a lesser extent, business loan book at a rate that is many times system growth, but over the past six months growth in deposits has been even more impressive.
Macquarie appears to have decided to limit exposure to volatile wholesale markets and fund its BFS lending with deposits, which grew 19 per cent to A$116.7 billion over the six months to September – an annualised rate of 38 per cent.
Apart from limiting exposure to market volatility, another advantage with deposits is that the deposit-taker has some control over pricing.
Macquarie’s home loan book grew 13 per cent over the six months, from $89.5 million in March to $101 billion at the end of September.
The business loan book was up 7 per cent to $12.3 billion over the same period. Car loans volume fell from $8.8 billion to $7.3 billion over the six months, following the sale of the dealer finance business in December 2021.
Macquarie Group raised term wholesale funding of $15.4 billion over the six months to September, including $8.5 billion of bank group wholesale funding. But the great majority of banking and financial services division loans are funded by deposits.
Of 1.7 million banking and financial services customers, 986,000 are depositors.
Macquarie released its September half-year results on Friday, reporting that the Macquarie banking and financial services division increased its net profit contribution by 20 per cent over the previous corresponding period, thanks to higher margins.
The division’s net interest and trading income was $1.2 billion, up from $974 million in the previous corresponding period, and net profit was $580 million (up from $482 million).
Impairment charges fell from $31 million in the September half last year to $9 million in the latest half. The lower charge was largely due to provision releases in auto loans as the portfolio runs off.
Like Judo Bank, which also relies heavily on deposit funding, Macquarie has shown that deposit-takers can pay a premium to guarantee a strong flow of deposits and still improve margins. It is currently paying a 4 per cent “welcome rate” for four months on its savings account, reverting to a base rate of 3.2 per cent.
It is offering term deposit rates of 3.35 per cent for six months and 4.1 per cent for 12 months.