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Why I’d buy Macquarie shares over CBA shares at this share price

There are many bank shares that you can buy on the ASX: Huge banks like Commonwealth Bank of Australia (ASX: CBA), regional banks like Bank of Queensland Limited (ASX: BOQ) and investment banks like Macquarie Group Ltd (ASX: MQG).

But I’m quite wary of choosing most of the banks for my portfolio, I’m wary of both the large banks like CBA & Westpac Banking Corp (ASX: WBC) and smaller banks like BOQ & Bendigo and Adelaide Bank Ltd (ASX: BEN).  

Of all the banks I could invest in I would only want to think about Macquarie shares these days. Just today ANZ showed that its mortgage arrears are still rising, mortgage holders are still risky for banks.

I much prefer the idea of investing Macquarie because it’s more diverse by earnings type and it’s far more geographically diverse too. Around two thirds of its earnings comes from overseas – it’s much easier to grow profit if you can decide to allocate resources to almost anywhere in the world to grow profit.

As time goes on I think loans are becoming more commodity-like where borrowers can compare large numbers of products on the internet or with a broker, whereas Macquarie can offer its clients more specialised services that aren’t as easily competed with.

I’m also concerned that retail banks are going to see more competition from technology businesses like Apple, Facebook and Alphabet (Google) that want to take a slice of the earnings pie.

Foolish takeaway

Macquarie is trading at 13x FY21’s estimated earnings and CBA is trading at 14x FY21’s estimated earnings. I would much rather buy shares of Macquarie for its potential growth, diversification and the other reasons I’ve written about in this article.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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