Macquarie mortgage growth slows amid fierce competition

Macquarie Group’s rapid growth in mortgages has slowed sharply, in what analysts say could be a sign the investment giant is happy to sit on the sidelines during a period of fierce competition.

Macquarie, which is better known for investment banking but is also the fifth-largest mortgage provider in Australia, has now expanded its home loan portfolio more slowly than the market average for two months in a row, figures released on Friday showed.

Macquarie Group has about 5 per cent of the home loan market, but its growth has slowed lately.Credit: Bloomberg

In contrast, ANZ Bank has continued on its run of strong expansion in home loans, as it seeks to make up for previous market share losses and carve out a bigger share in the crucial banking battleground.

Macquarie’s home loan book grew by 0.4 per cent in May, slower than average growth of 0.5 per cent for the entire market, Morningstar’s analysis of Australian Prudential Regulation Authority (APRA) data found. It was also slower than the market average in April, in stark contrast to earlier periods when it was gobbling up share from rivals.

UBS analyst John Storey said Macquarie’s weaker growth in mortgages was linked to a slowdown in deposits, where it lost share in May amid stiff competition with other banks. As well, Storey highlighted the aggressive pricing on mortgages, which some banks had complained about, saying it was “irrational”.

“Clearly the economics were starting to deteriorate and things did not make much sense,” Storey said. “Macquarie are very astute in terms of how they allocate capital. They have many other options in terms of where they can allocate capital, unlike some other Australian banks.”

The slowdown follows a period in which Macquarie has sought to shake up the retail banking sector – which is dominated by Commonwealth Bank, Westpac, and National Australia Bank – by targeting lower-risk borrowers with plenty of equity or sizeable deposits.

In Macquarie’s latest full year, its home loan portfolio surged by 21 per cent, and the bank last year also unveiled competitive interest rates on transaction accounts – products that typically pay near zero interest.

Morningstar analyst Nathan Zaia also noted the slowdown in Macquarie’s growth, and suggested it may be seeking to improve its margins in the face of strong competition for both loans and deposits. “That might be a sign they are no longer willing to price as aggressively,” Zaia said.

Zaia’s analysis of APRA data shows that until April this year, Macquarie’s mortgage book had been growing at least twice as quickly as the market average.

Macquarie’s growth may also have slowed because unlike its larger rivals, it opted not to pay cashbacks of several thousand dollars earlier this year to attract home loan customers.

Among the big four banks, ANZ is the smallest in home loans, but it has been growing at the fastest pace lately, as it also looks to bulk up its market share by buying Suncorp’s banking unit. The Australian Competition and Consumer Commission is scheduled to hand down its decision on the deal in July, and analysts think it will be a line-ball call.

Storey, who has a “buy” on ANZ and Macquarie, said ANZ’s recent growth in mortgages had seen the Melbourne-based bank win about 23 per cent of the net flow of new lending in the last month.

Rivals such as NAB have taken the opposite approach and have been growing at a slower pace than the market in recent times, arguing small business lending presents a better opportunity.

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