Today, ASX bank investors' fears were realised when National Australia Bank Ltd (ASX: NAB) came out and announced a capital raising alongside a 64% cut to its interim dividend.
It could have been worse, too. Some investors have been wondering if the 'big 4' banks would be paying dividends at all in 2020.
Although we haven't yet heard from Westpac Banking Corp (ASX: WBC) or Australia and New Zealand Banking Group (ASX: ANZ) regarding their dividends just yet, I think investors should brace themselves for a very similar experience to what NAB shareholders are going through today.
So for investors who like some exposure to the financial sector, what's the best option right now?
Well, I think it's Macquarie Group Ltd (ASX: MQG).
What do Macquarie shares offer investors today?
Not a whole lot of banking, for a start. Macquarie does offer retail banking services like mortgages and credit cards, but they make up a small proportion of the "millionaire factory's" total earnings base (12% in 2019). That reduces Macquarie's vulnerability to the issues plaguing the big banks, such as reliance on property prices and record low interest rates in my view. Far larger components of Macquarie's earnings are the investment banking business (MacCap) as well as asset management.
Macquarie invests in a range of listed and unlisted assets around the world through MacCap, including renewable energy and infrastructure like toll roads and airports. It has proved deft at this over the years, which was a big reason why the Macquarie share price went from under $18 in 2009 to over $150 this year.
Adding to this has been the success of the Macquarie funds/asset management business. In 2019, Macquarie had over $550 billion in funds under management, which was an 11% increase on the prior year. Although this capital will likely take a hit in 2020, I think it has set the bank up very well for the long term.
Because of these diverse earnings streams, I think Macquarie is far better placed to weather the coronavirus storm right now than the other big banks, and I also think the company's dividends are on a much stronger footing (although we still might see a cut in 2020).
Foolish takeaway
I understand many investors wouldn't be too keen on the ASX financials sector in the current time. Nonetheless, I think Macquarie is the best pick of the bunch for those investors who want a well-run, diversified financial stock. It has a long history of delivering for its shareholders, and I don't see why this won't continue well into the future.
