Macquarie Group Ltd (ASX: MQG) shares have significantly outperformed other S&P/ASX 200 Index (ASX: XJO) bank shares over the past five years, with a rise of 50%. Indeed, Macquarie would still be my top pick for the long term compared to the other major players because of its growth potential.
Certainly, there are plenty of other banks including Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ), and National Australia Bank Ltd (ASX: NAB).
But Macquarie has a number of divisions, including its banking and financial services (BFS) division, asset management, Macquarie Capital, and commodities and global markets (CGM).
There are two key reasons why I like the financial giant.
International growth
A large majority of earnings made by other ASX 200 bank shares comes from Australia and New Zealand –just those two countries.
Macquaries has far greater international exposure.
Certainly, its profit has grown nicely over the last few years. Not only has Macquarie's income grown, but the percentage of income that's from international sources has increased. In the FY23 result, it reported its international income was 71% of total income.
I like that Macquarie has much more earnings diversification than other ASX 200 bank shares.
By looking to the entire global market, Macquarie gives itself a very wide addressable market to seek the best opportunities for expansion.
I like that Macquarie's segments and global outlook have allowed it to generate strong returns for investors. In FY23, it achieved an annualised return on equity (ROE) of 16.9% in FY23, with an 18.1% ROE in the second half of FY23.
Impressive results in Australia
Macquarie is also doing remarkably well with its banking division. By increasing its market share in Australia, it's cutting into the market share of other ASX 200 bank shares.
In FY23, the BFS division achieved 20% growth of operating income and 20% growth of net profit. It saw 32% growth of BFS deposits to $129.4 billion, while Macquarie's home loan portfolio saw 21% growth to $108.1 billion. Its business banking loan portfolio also grew 13% to $13 billion.
Not only is this boosting Macquarie, but it's a challenge to other ASX 200 bank shares.
Overall, FY24 may not be quite as profitable as FY23, but Macquarie is still priced nicely at the current level. According to Commsec, it's valued at 15x FY24's estimated earnings and 14x FY25's estimated earnings.
I think Macquarie shares are primed to deliver outperformance against other ASX 200 bank shares over the next three years and the longer term.
