The Big Four banks are said to be fully valued in price, but could investment bank Macquarie Group Ltd (ASX: MQG) be the same? It has risen in share price steadily since mid-2012 on the back of much higher earnings. Just within the past twelve months, it is up about 47% while the S&P ASX 200 Index (ASX: ^XJO) has gained about 15%.
The investment bank is returning to revenue and earnings levels of previous years. I believe the company has further to grow and the reasons why it has improved are still in play.
— Stronger financial markets
Both international and domestic financial markets are improving from the Global Financial Crisis. The US stock market is hitting new highs and the bull market is still making its way upwards.
Asian economies are growing strong also. China is urbanising. Its growing middle class will demand more financial services and its businesses will increase their overseas investments. The bank thrives in rising markets and its managed funds are achieving higher returns.
— Corporate activity is rising
As businesses grow and investing opportunities arise, corporate activity such as mergers and takeovers starts to increase. More companies are raising capital through share issues, tapping into investor interest of higher returns in rising stock markets.
Also, it was reported that it will advise over the potential sale of some of Leighton Holdings Limited's (ASX: LEI) assets and subsidiaries. Macquarie Bank generates good revenue and earnings from these services.
— Growing its residential mortgage business
Macquarie Group is growing its residential home loan volumes to take advantage of the rising housing market. It is increasing its market share of the loan market, which is dominated by the Big Four banks like Commonwealth Bank of Australia and ANZ.
Working with mortgage broking and financial services companies like Yellow Brick Road Holdings Ltd (ASX: YBR), it can reach more borrowers.
