From Banking Day:
The rapid growth of Macquarie Group’s Australian mortgage business prompted a series of questions from analysts at an investor briefing on Friday, when Macquarie presented its results for the September half.
Over the six months to September Macquarie’s mortgage book grew by more than 16 per cent to A$19.8 billion.…Macquarie’s head of banking and financial services, Greg Ward, said the bank was “cognisant” of the growth in house prices and investor activity and was “careful” with its loan-to-valuation and serviceability policies.
…The division, which includes the group’s mortgage business, increased its operating income by 12 per cent in the six months to September, compared with the previous corresponding period, and increased its net profit contribution by 27 per cent.
The division’s activities also include business banking and wealth management.
Macquarie reported a net profit of $678 million for the six months to September – up 35 per cent on the previous corresponding period. Banking and financial services contributed $141 million to the result.…Before the GFC Macquarie funded its mortgage book through securitisation. It was forced to stop lending in 2008, after the mortgage securitisation market collapsed.
Today it funds its mortgage business through deposits held on balance sheet, as well as a relatively small amount of securitisation. It is a more stable funding mix.
Macquarie has total retail deposits of $35.3 billion, which grew by six per cent over the six months to September.
32% growth per annum in a mortgage book doesn’t look very “careful” to me. On funding, what will matter is the bank’s overall deposit-to-loan ratio not just that of the mortgage book. If funding mortgages from deposits means it’s funding other activities increasingly from wholesale debt then nothing has changed since the GFC.
This is a relatively small proportion of Australia’s overall mortgage mountain, roughly 1.6%, but you can imagine what such a grab for market share is doing to the major’s lending standards…
