RBC Capital Markets has initiated coverage of Macquarie Group Ltd (ASX: MQG) shares, with a bullish price target, saying the financial giant is "reinventing itself''.
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Macquarie tipped for steady growth
The broker has issued a new research note on Macquarie, and said they expected the company to deliver mid-to-high single-digit earnings growth into FY29, "underpinned by operating leverage across asset management and personal banking''.
RBC said on the outlook for Macquarie:
Our ~6.5% FY26-29 earnings compound annual growth rate (CAGR) sees us ahead of consensus. What's more, we think earnings risks are skewed to the upside given ongoing volatility in commodity markets, and potential for large asset sales. Macquarie is reinventing itself – pivoting towards recurring private markets asset management and domestic banking growth, while building out global energy trading and capital markets capabilities that provide earnings upside. The shift is away from balance sheet-intensive asset development and towards capital-light private credit and funds management.
RBC said the recent changes at Macquarie had been substantial, with the company refocusing on higher return on equity divisions and prioritising recurring revenue growth.
The commodities and global markets division would account for 39% of FY27 profit, RBC said, with the broker expecting about 8% commodity revenue CAGR from FY26 to FY29.
RBC said:
Near-term potential catalysts include the historically low EU gas storage levels and Qatar LNG outages, and longer-term potential catalysts include 1.5 million tonnes per annum of LNG offtake agreements (Texas LNG and AMIGO LNG) coming online from FY28E and data centre energy demand across constrained US power grids. We estimate every additional 10% commodity revenue growth adds ~3.5% to group FY27 earnings.
Macquarie Asset Management, which will account for about 28% of FY27 profit, "has lagged other divisions", but is pivoting to private credit to unlock growth, RBC said.
Meanwhile, banking and financial services had been the most consistent compounder in the group, RBC said.
They added:
We forecast BFS divisional profit contribution to grow 15% in FY27E and then ease to 8-10% in FY28-29E as Australian mortgage system growth slows. However, given options to further reduce it cost-to-income ratio (54% in FY26, potentially heading 40% over time), we think BFS earnings growth may be able to surprise on the upside. MQG holds just 7.1% of Australian housing loans and 6.5% of deposits.
Macquarie shares looking like good value
RBC said the release of Macquarie's first-half results on November 6 should be a catalyst for the stock, "as we see upside risks to consensus forecasts''.
RBC has a price target of $300 on Macquarie shares, compared with $244.60 at the time of writing.
Macquarie is valued at $91.89 billion.
