Last week, I wrote an article about the growth prospects of Australia's largest investment bank, Macquarie Group Ltd (ASX: MQG). I highlighted the increased likelihood of a better-than-expected result from the group's Funds Management division than had previously been forecast by management.
Unsurprisingly, the bank yesterday made an announcement to the ASX which confirmed my expectations. The bank said it expected its first-half profit for fiscal 2015 to be up approximately 25% to 30% on the prior corresponding period and highlighted performance fees as the catalyst. "Notably, we now expect MFG to be up on FY14 due to increased performance fees from listed and unlisted funds."
Clearly, Macquarie's global presence has helped the group bolster earnings so far in 2015, despite assets under management falling around 5%.
Macquarie has been successful on the international stage but that's not going unnoticed with other regionally focused banks, and I bet management at Australia and New Zealand Banking Group (ASX: ANZ) are leveraging off its success. ANZ has been growing its international presence since 2007 when CEO Mike Smith launched the Super Regional Strategy with a keen focus on Asia.
Although ANZ is a retail bank, its International and Institutional Banking division – headed by Andrew Géczy – is leading the charge by capitalising on business banking and trade flows throughout the Asia-Pacific region.
Buy, Hold, or Sell?
Macquarie Group – like any fund manager or investment bank – should perform strongly during bull markets. Whilst its share price may offer some upside potential in the short term, investors must be able to stomach the idea that they'd be buying an investment bank at, potentially, the top of a market cycle. I like the bank and its growing annuities style business but I'm patiently waiting on the sidelines for a lower price.
In addition, regular readers will know ANZ is my favourite big bank stock because it is the only one actively diversifying its earnings away from Australia and New Zealand. However, like Macquarie, I'd rather wait for a lower price before committing to a purchase.
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