JP Morgan estimates that Macquarie’s domestic mortgage book will double to $30 billion.
New research from JP Morgan has found that Macquarie mortgages will continue to grow significantly over the next two years, largely due to excess deposits that are currently invested in liquids.
“They can redeploy that into the mortgage book reasonably freely,” JP Morgan executive director Scott Manning told Mortgage Business.
“At the current rate of growth, we think that will give them ongoing strong growth for the next two years and that will get their balances up from their current levels up to around $30 billion over the next two years,” Mr Manning said.
APRA figures value Macquarie’s mortgage book at $13.5 billion as of 31 April.
JP Morgan expects the lender’s mortgage growth to moderate after two years.
“At that point you start to get some issues around commoditisation of the front book that you have just grown, as well as more stringent liability matching on the other side,” Mr Manning said.
“You’ve gone from using excess deposits to then being reliant on deposit growth and RMBS funding,” he said. “So we expect that growth rate to slow down after that two-year period.”
By this time the bank should have its core IT banking system – which is currently being developed – up and running, allowing it to broaden its retail offering, Mr Manning said, noting the recent acquisition of the Woolworths credit card offering from HSBC as an example of future retail plays.
Potential acquisition targets over the next two years include ING DIRECT, ME Bank and the Australian subsidiaries of HSBC or Citi, Mr Manning said.
“However, Macquarie traditionally doesn’t pay a lot of goodwill,” he said.
“So if you are looking at the capital you would tie up in goodwill relative to the rate of growth that you are currently doing and therefore the amount of capital you could deploy organically, it would be hard to argue a business case to pay goodwill for an acquisition.
“You may as well deploy that capital organically.”