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Date : 10/06/2024

Is Macquarie Group Ltd (ASX: MQG) Best ASX Bank Stock Right Now?

There are many reasons why ASX bank stocks are always investors’ favourites. However, among those reasons, one aspect that investors appreciate the most is its consistent dividend-paying history and robust position in the market.

Due to this reason, Macquarie Group Ltd (ASX: MQG) is a favourite among these blue-chip stocks. The reasons are simple: its business is geographically diversified and does not rely on the national market only. It has expanded its horizons to international markets as well. Secondly, the bank’s business model is highly diversified and generates revenue through many divisions. This article will explain why MQG stock could be in your portfolio and why it is a worthy candidate to consider in the long run.

Macquarie Group Share Analysis & Forecast

MQG: Macquarie Is Not Limited to Australia and New Zealand

There may be big banking giants in the ASX stock market, but one of their major drawbacks is that they are only limited to the Australian and New Zealand markets. That’s where Macquarie wins a top position – its presence in the global markets.

Most of the ASX banks lend within Australia. This means that their investments are heavily dependent on the local economy. Investors can consider this lack of variety in their investments very risky.

Recently, banks have noticed a significant rise in their arrears due to inflation and the increased cost of living. This has caused people to miss their home loan payments. In its third-quarter update, CBA pointed to its arrears of overdue home loans for more than three months, which surged to 0.61% as of 31 March 20, up from 0.44% in March 2023.

Contrary to this, Macquarie Group Ltd (ASX: MQG) is geographically diversified and would enter any market worldwide that could provide long-term profits. This is the reason this global investment bank generates around 2/3 of its earnings internationally.

MQG: A Diversified Business Model

As we have mentioned, most ASX bank stock businesses depend on providing household and business loans in Australia and New Zealand.

 

On the other hand, Macquarie Group Ltd (ASX: MQG) is quite the opposite when compared to its peers in the industry. The bank has diversified operations such as:

  • Macquarie Asset Management (MAM) division
  • A Banking and Financial (BFS) segment
  • Investment Banking division (Macquarie Capital)
  • Commodities and Global Markets (CGM) division

Stepping into the Australian banking division is a deliberate move by Macquarie Group. The reason is quite simple: to give competition to its peers in the industry and capture a significant market share. However, the bank does not rely on this segment. Due to its diversified business model, Macquarie generates its majority of earnings from other segments, unlike CBA and Westpac.

Due to this diversified business nature, Macquarie seems a rational and reliable option amongst other ASX bank stocks.

MQG: The Performance of its Segments

The MAM, or Macquarie Asset Management division, delivers consistent base management fees. This segment provides the bank with annuity-style revenue.

The bank can take advantage of market or energy price fluctuations with CGM when there are significant changes.

Macquarie’s investment banking segment delivers significant profits during most normal economic conditions.

Macquarie has greatly utilized this diversified business model in the past decade. The bank has grown significantly in the Americas, Europe, and Asia. Although 2024 was rough, the company still registered $6.7 billion in profits across these four main divisions.

How to play Macquarie?

Macquarie shares have surged over 10% in the past six months, but that doesn’t mean they are cheap. However, we believe that Macquarie has the potential to achieve higher earnings growth compared to domestic ASX bank stocks. The main reason is its global operations. Our analysts estimate that MQG stock is valued at 17 times its projected earnings for the fiscal year 2027. Its annual dividend has increased by around 150% in the past decade. This shows Macquarie’s growth and commitment to delivering value to its shareholders.

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