Macquarie Group Ltd (ASX: MQG) shares could receive a boost in the coming months and years from the ASX financial share's plans to grow its position in a very important market.
The business may be best known for its global investment banking operations, including asset management. But, there's one division that has grown significantly over the last five years – banking and financial services (BFS). And Macquarie isn't done growing.
While its banking market share isn't as much as Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and ANZ Group Holdings Ltd (ASX: ANZ), Macquarie has plans to challenge the big ASX bank shares even more.
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Macquarie's growing loan market share
According to reporting by the Australian Financial Review, Macquarie grew its home loan business five times faster than the major bank rivals in July.
The Macquarie mortgage book rose by 1.6% over July, while the broader market only increased by 0.3%.
According to reporting by the AFR, UBS analyst John Storey said Macquarie had reached a market share of 5.5% of owner-occupier and investor lending. The analyst suggested Macquarie's focus on the broker channel has been successful. Storey said:
Macquarie are coming off a low base where growth above-system is not as difficult as it would be if they were bigger.
The metric I would use is how their book grew on a net basis by $1.9 billion month-on-month.
There has been a reset on the liability side of the balance sheet. Funding costs have reset a little bit after the TFF refinancing.
There has been a drop-off in funding cost pressures, and that has allowed them to go a little harder on pricing.
The APRA stats show that CBA and ANZ grew their mortgage books at a faster pace than the overall Australian loan system, at approximately 0.4% each. However, Westpac's loan book growth was flat month over month in July.
The NAB mortgage book reportedly decreased by approximately $300 million in July.
Turning to business lending, the AFR reported that Westpac grew its business lending book by more than three times the overall loan system in Australia, enabling its market share to increase to 15.3%. The business loan books of ANZ and CBA shrank in July. NAB continues to lead the industry, with a business lending market share of 21.96%.
Foolish takeaway
Macquarie's strong balance sheet allows it to challenge the other ASX bank shares, leading to a fast-growing mortgage book.
If Macquarie keeps growing faster than the majors, it could reach a larger market share than NAB. This could be good for Macquarie shares but challenging for other ASX bank shares if it means less growth and/or a lower net interest margin (NIM).
