The Macquarie Group Ltd (ASX: MQG) share price may be retreating from its record high, but it might be only a matter of time before it resets new records, according to a top broker.
Shares in the investment bank fell 1.8% to $194.14 in morning trade as ASX bank shares tumbled. The Westpac Banking Corp (ASX: WBC) share price crashed 6.3% to $24.07 after it released disappointing results and that has dragged on sentiment towards the sector.
The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price and National Australia Bank Ltd. (ASX: NAB) share price are also trading in the red.
In contrast, the S&P/ASX 200 Index (Index:^AXJO) is trading 0.4% higher at the time of writing.
Buy the Macquarie share price on dips
But the weakness in the Macquarie share price may not last. Citigroup reckons its shares are good value as it upgraded the ASX shares to "buy" from "neutral".
The broker's bullish change of heart comes on the back of Macquarie's results last week. The bank's first half net profit of just over $2 billion was about 6% ahead of consensus.
Citi noted that this is the fourth consecutive quarter where management has posted an average of at least $1 billion in net profit.
Strong earnings track record and potential upgrades
"Prior to COVID, Macquarie has only achieved this level once throughout its 50-year history," said the broker.
"The unprecedented market conditions for asset sellers, combined with most serious energy crisis since the 1991 Gulf war, should enable Macquarie to continue this streak for at least the next two quarters."
This means further consensus upgrades could be on the cards for the Macquarie share price.
Don't fret about rising rates
Expectations that interest rates will rise sooner than expected will be a headwind for bank earnings. But this negative is expected to be more than offset by volatile commodity prices.
"The upgrade to guidance since the recent AGM suggests that MQG is well placed to be a material beneficiary of an evolving energy crisis," added Citi.
"Business capital deployed into CGM is supportive of increased trading activity and a more sustainable revenue platform, of which commodities is a key driver that we expect will peak at $2.8bn in FY22 but roll off to a higher base."
Further, the increase in equity investments also bodes well for the Macquarie share price. This is because that is tipped to boost its earnings over the medium term.
What is the Macquarie share price worth?
"We have upgraded our earnings forecasts by ~17% in FY22E and an average ~10% in FY23-24E," said Citi.
"CGM and MacCap make up the majority of our revisions, with best divisions set to benefit from increased activity levels."
Citi increased its 12-month price target on the Macquarie share price to $226 from $200 a share.
