The Macquarie Group Ltd (ASX: MQG) share price is finding plenty of support on Wednesday.
Shares in the $70.3 billion financial powerhouse are trading 2.47% higher to $195.04 in early afternoon trading. The positive reception places the company's shares above yesterday's high — a move followed by Macquarie's third-quarter trading update.
Though, it's talk of a potentially colossal acquisition in the future that might be capturing the minds of Macquarie shareholders today.
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Where could Macquarie go hunting?
A challenging macro environment in the third quarter might have weighed on Macquarie's annuity-style businesses, but its spare cash is in tip-top share.
According to the release, the investment bank's surplus capital sat at $12.5 billion at the end of December 2022. The considerably conservative buffer has fuelled speculation that Macquarie could be preparing for a major move.
During the call yesterday, Jefferies Head of Banks Equity Australia, Brian Johnson, pointed this out when asking:
[…] it seems that you're positioning for some kind of opportunities that may well present themselves. Could you give us a feeling of what might actually interest you in that space: whether it's acquisitions or whatever. Can we just get a feeling about what this super strong balance sheet is for?
In response, Macquarie CEO Shemara Wikramanayake provided a host of reasons why the operating environment remains uncertain. Inflation, energy market volatility, and the climate transition are all examples of drivers for 'a lot of dislocation'.
In that sort of environment, it behoves us to have capital in case there may be acquisitions. For example, in the asset manager in a Delaware-like opportunity, in terms of the correction that happened when we invested in that business.
The opportunity Wikramanayake is referencing is one where Macquarie snatched up US$125 billion worth of assets under management for $520 million by acquiring Delaware Investments in 2019.
However, the esteemed CEO also mentioned the Commodities and Global Markets (CGM) and the Banking and Financial Services divisions as potential areas for capital consumption. The banking sector is already bustling with consolidation — something that Macquarie might try its hand at.
Macquarie share price goes strength to strength
The market has broadly been on fire so far this year, with the S&P/ASX 200 Index (ASX: XJO) up more than 8%. However, this gain is put to shame by the massive 18.3% the Macquarie share price has returned already in 2023.
Recently, Don Hamson of Plato Investment Management named Macquarie as one company he is "quite positive on" for dividends this year. Speaking to The Motley Fool, Hamson highlighted the diversity of Macquarie's revenues as one of its most attractive traits.
Based on the current Macquarie share price, the company trades on a price-to-earnings (P/E) ratio of 15 times.
