Macquarie’s high-wire mortgage balancing act

John Kavanagh

Macquarie Group’s banking and financial services division has had another year of very high growth in its home loan book, while maintaining modest risk settings in the portfolio.

The BFS loan portfolio grew 24 per cent to A$110.2 billion in the year to March 2022. Home loans were up 34 per cent to $89.5 billion and business loans up 13 per cent to $10.2 billion, while the car loan volume fell 23 per cent to $8.8 billion.

The car loan portfolio fell because Macquarie sold its dealer finance business to Allied Credit, ceasing originations from dealers. It has since launched a specialised electric vehicle buying service “to help customer transition to an electric vehicle”.

Growth in the home loan portfolio was more than four times system growth of 7.9 per cent over the 12 months to March. 

In the home loan portfolio, the average loan-to-valuation ratio at origination was 64 per cent, which is lower than the levels reported by ANZ and NAB last week. The average dynamic LVR was 47 per cent.

Sixty-five per cent of borrowers are owner occupiers and 78 per cent of loans are paying principal and interest.

BFS made a profit contribution of A$1 billion to group earnings, an increase of 30 per cent over the previous year.

Macquarie said the growth was attributable mainly to higher interest and trading income driven by volume growth in the loan portfolio.

After booking an impairment charge of $115 million in 2020/21, the BFS released $22 million of COVID overlays in the year to March.

Deposits grew by 21 per cent to $98 billion. At the end of March, customer deposits represented 47 per cent of the bank group’s total funding.

Overall, Macquarie reported a net profit of $4.7 billion – an increase of 56 per cent over the previous year. Net operating income grew 36 per cent, while operating expenses grew 22 per cent.

The group’s return on equity was 18.7 per cent – up from 14.3 per cent in 2020/21.

In a presentation to investors on Friday, Macquarie Group chief executive Shemara Wikramanayake, said the group was confident of “ongoing momentum” in the loan and deposit books.

She said BFS was working on opportunities to increase engagement with business clients.