Bank thickens mortgage book by 20%

In its 2019 operational briefing, Macquarie Group has reported that its mortgage portfolio, listed under its Banking and Financial Services (BFS) division increased by 19.5 per cent in the year to 31 December 2018.

In monetary terms, the bank’s residential mortgage book increased by $6.1 billion, from $31.2 billion as at 31 December 2017 to $37.3 billion by the end of December 2018.

In comparison, the bank grew its home lending portfolio by 9.1 per cent ($2.6 billion) in the year to 31 December 2017 from $28.6 billion as at 31 December 2016.

However, Macquarie reported slower lending growth of 3 per cent over the December quarter 2018, compared to 4 per cent growth in the previous corresponding period.

Further, Macquarie revealed that the value of deposits held by the bank also increased by 3 per cent over the December quarter of 2018 to $50.1 billion, an annual increase of $3.8 billion from $46.3 billion as at 31 December 2017,

The net profit contribution of Macquarie’s BFS division to the overall group remained stable at 11 per cent but continues to make the smallest contribution of the group’s divisions, with Macquarie Asset Management making the largest contribution (29 per cent), followed by Commodities and Global Markets (27 per cent), Corporate and Asset Finance (17 per cent), and Macquarie Capital (16 per cent).

Macquarie Group stated that it expects to repeat the 15 per cent annual net profit increase it reported in its 2018 full-year (FY18) financial results when it releases its FY19 results.

If the group meets its targets, Macquarie would post a net profit of approximately $2.9 billion.    

However, Macquarie noted that the group’s performance is subject to:

• the conduct of period-end reviews and the completion rate of transactions
• market conditions
• the impact of foreign exchange
• potential regulatory changes and tax uncertainties
• geographic composition of income

Reflecting on the result, Macquarie Group managing director and CEO Shemara Wikramanayake said: “Macquarie remains well positioned to deliver superior performance in the medium term.

“This is due to our deep expertise in major markets, strength in diversity and ability to adapt the portfolio mix to changing market conditions, as well as the ongoing benefits of continued cost initiatives, a strong and conservative balance sheet and a proven risk management framework and culture.”

Following the operational briefing, Ms Wikramanayake highlighted the value of the broker channel amid proposed reforms to the broking model outlined in the final report of the banking royal commission.  

The Macquarie CEO told the media that the financial services group would cooperate with policymakers and regulators in implementing potential reforms to the broker model but noted that Macquarie was “waiting to see what gets enacted”, adding that it’s “too early to tell”.

In November, former Macquarie CEO Nicholas Moore warned of the “unintended consequences” that may rise off the back of changes to the third-party channel’s remuneration model.  

Appearing before the banking royal commission, Mr Moore noted the role that brokers have played in bolstering competition in the mortgage market.

[Related: Bank’s mortgage portfolio grows despite ‘challenges’]