Macquarie Group Ltd (ASX: MQG) shares could continue to perform well if the ASX financial share is successful with its expansion plans for Europe.
One of the best qualities of the Macquarie business model is that its earnings come from around the world. It can invest anywhere it sees opportunities. The company can generate the strongest return for its money by looking worldwide.
Now it seems Europe could be the next region where the company establishes a stronger presence.
Macquarie looks to Europe for growth
The investment bank is establishing large offices in some of Europe's biggest cities, including Paris and Milan.
According to reporting by the Australian Financial Review, Macquarie is looking to increase its investing and deal-making in Italy.
It was pointed out the European market has 450 million people and a $25 trillion economy, which could mean the Europe division of the business could eventually become larger than the Australian segment.
Macquarie's staff numbers in continental Europe have increased by almost 33% in the last three years and, reportedly, its Europe, Middle East, and Africa business (EMEA) accounts for around 25% of global income already. If this grows even further, it can also help grow the Macquarie share price.
Macquarie Capital global head Michael Silverton said:
We decided to look at our German M&A business and see if we could connect the dots more across Europe. That led to us combining a number of our activities and looking at the business more holistically, seeking to leverage the strengths we have across the group.
According to reporting by the AFR, this then helped recruitment in cities and teams in those places to step into 'adjacencies' which means Macquarie can offer more services.
Silverton said:
We've reached a point of maturity where our offering is deep enough that we can justify the on-the-ground presence and develop a local business in France. And then it's plugging into the broader Macquarie network.
What's attractive about Europe?
Macquarie is looking for "long-term secular trends", such as Europe's decarbonisation push, as well as its digital economy. The ASX financial share has estimated that reaching net zero could need $50 trillion of investment.
The investment bank points out that there is still a need for "solutions", even during these uncertain times. Macquarie is "building for the long run" and Silverton believes that the "time is right" for it to build its network.
Another area that is attracting Macquarie is the continent's ageing demographics, which is creating opportunities in social and healthcare infrastructure.
The AFR also reported on the company sniffing an opportunity with Europe looking to "wean itself off a dependency on China for critical minerals". This opens up a window for Macquarie Capital to advise on or finance projects, while the commodities and global markets (CGM) team can also get involved.
Macquarie's European boss Paul Plewman said:
With markets like aluminium, anyone can hedge. But try hedging lithium and there are very few people who can offer clients [like] that.
What's really important as I look across Europe is that we retain that Macquarie culture. As we grow and set up offices, we don't lose sight of where we've come from, how we behave and why we've been successful.
Foolish takeaway
Time will tell how successful Macquarie is at expanding in Europe, but I'd back the company considering how successful it has been in other markets.
In FY23, the business said it generated an overall return on equity (ROE) of around 17%. If it can make that level of return in Europe, then I think it'd be doing very well and can add a lot more profit for Macquarie. It could be a good catalyst to help drive the Macquarie share price towards $200.
According to Commsec, the Macquarie share price is valued at under 15x FY25's estimated earnings. This could be a good time to invest for the long term.
