The Motley Fool

Macquarie our ‘fifth pillar’?

Macquarie Bank – the traditional banking arm of investment bank Macquarie Group (ASX: MQG) has posted a 55% rise in mortgages over the past six months, as the group looks to break into the Australian mortgage market.

According to a report in today’s Australian Financial Review (AFR), Macquarie has seen its mortgage lending rise to $6.2 billion, with the majority of loans sold through Mark Bouris’ mortgage broker Yellow Brick Road (ASX: YBR).

The AFR believes that Macquarie is determined to become a more serious player in retail banking, as returns in its traditional investment banking businesses falter, due to low market activity, a lack of mergers & acquisitions, and low trading volumes. The newspaper reports that while Macquarie has continually downplayed its aspirations in retail banking, sources claim it has aspirations to become Australia’s ‘fifth pillar’ in home lending against the big four banks of ANZ Bank (ASX: ANZ), Commonwealth Bank (ASX: CBA), National Australia Bank (ASX: NAB) and Westpac Banking Corporation (ASX: WBC).

The big four currently control over 90% of the home mortgage market, after taking over smaller players such as RAMS, St George and BankWest, and the exit from the market of others. Macquarie has recently started advertising its own home loans on television, but marketing is deliberately being kept low key, to avoid a price war with competitors.

The AFR report suggests the big four could be vulnerable to new competition because much of their funding was sourced several years ago at high rates. In contrast, a new competitor can take advantage of cheap funding available in international credit markets currently.

Macquarie can also take advantage of around $30 billion in cheap deposits through its popular cash management account, which pays an interest rate equal to the Reserve Bank’s cash rate – currently 3%.

In November 2012, Macquarie announced a deal with Yellow Brick Road, to provide the broker with cheap loans. Yellow Brick Road then offered discounted home loans to borrowers at interest rates up to 1.15% lower than the big four banks.

Foolish takeaway

Increased competition should mean more borrowers look outside the big four banks to source their mortgages, and if successful, should see the market dominance of the big four ease.

With its legendary, fully franked 28 cent dividend, Telstra is the darling of Aussie investors. Chances are even if you don’t own Telstra shares directly, your superannuation fund does. But with its share price skyrocketing over the past year, is Telstra past its prime? Click here for our brand-new report: Buy, Sell, or Hold Telstra?

More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

One ASX Stock For An Estimated $US22 Billion Marijuana Market

A little-known ASX company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

And make no mistake – it is coming. To the tune of an estimated $US22 billion.

Cannabis legalisation is sweeping over North America, and full legalisation arrived in Canada in October 2018.

Here’s the best part: we think there’s one ASX stock that’s uniquely positioned to profit immensely from this explosive new industry… taking savvy investors along for what could be one heck of a ride.

AND, this is the first time The Motley Fool Australia has EVER put a BUY recommendation on a marijuana stock.

Simply click below to learn more on how you can profit from the coming cannabis boom.

Click here to find out more