Macquarie Group knocks off Westpac to be Australia’s third largest bank

The Millionaires’ Factory has taken the mantle as the nation’s third largest bank, after its market capitalisation surpassed that of embattled Westpac.

Macquarie's market capitalisation has soared, helping it overtake two of the major domestic banks. Picture: Ian Waldie/Bloomberg.

Macquarie Group has taken the mantle as the nation’s third-largest bank, after its market capitalisation surpassed that of embattled Westpac.

Shares in the asset management giant and investment bank, dubbed the Millionaires’ Factory, have rallied 1.5 per cent to $208.39 so far this year. In 2021, its performance was underpinned by a more than doubling in first-half profit, and Macquarie also raised $2.8bn to fund acquisitions and other growth opportunities.

Macquarie’s market capitalisation – which now stands just shy of $80bn – overtook that of ANZ in November and more recently it has pipped Westpac.

At Wednesday’s closing price, ANZ’s market valuation was $78.9bn, while Westpac’s stood at $79.5bn. National Australia Bank has a market capitalisation of $95.4bn, while market leader Commonwealth Bank is well out in front at $173.3bn.

Fund manager Martin Currie Australia’s senior analyst Matthew Davison on Wednesday said: “Macquarie’s recent rise in market capitalisation is reflective of their track record of superior execution and a positive backdrop for earnings growth in most divisions.

“An example of that execution track record is in Australian mortgage volumes, which has been in direct contrast to ANZ and Westpac. However, of most significance has been the re-rating of the stock’s earnings multiple to reflect the group’s ‘green’ credentials and ability to monetise some of the investment opportunities from ‘decarbonisation’ trends globally.”

ANZ and Westpac have grappled with mortgage growth over the past 12 months, while Macquarie has posted stellar growth and made market share inroads, albeit from a lower starting point.

JPMorgan’s analysis of the latest Australian Prudential Regulation Authority‘s lending data shows Macquarie posted mortgage growth of 29.2 per cent in November, compared to 1.4 per cent for ANZ and 2.3 per cent at Westpac.

But in home loan market share, Macquarie sits at just 4 per cent versus ANZ’s 14 per cent and Westpac’s 22 per cent. NAB has 14 per cent share while CBA leads the pack in mortgages and accounts for 26 per cent of the market.

Macquarie’s banking and financial services unit is, though, a smaller contributor to its income than its larger commodities and global markets and asset management divisions.

Macquarie chief executive Shemara Wikramanayake has not provided guidance for the 2022 financial year, although has said the company had plenty of opportunities to grow earnings across its business units.

“We’re finding lots of opportunities inorganically in the asset management business that are delivering good returns for us and we are organically investing a lot as well,” she said in October.

In that same month, Macquarie’s shares burst through $200 as analysts tipped a bumper period of earnings growth. The company has positioned to capitalise on the global decarbonisation theme and the acceleration of digital trends during the pandemic.

But it has not all been smooth sailing for Macquarie. It faced intense scrutiny last year over the disastrous listing of analytics group Nuix and revelations of subsequent governance failures.

Macquarie remains the largest Nuix shareholder and helped manage the ASX float.

On the regulatory front, APRA last year imposed an additional $500m capital charge on Macquarie due to multiple breaches of prudential and reporting standards.

The next date on Macquarie’s investor calendar is a February 8 operational briefing, ahead of the group ruling off its financial year on March 31.

Originally published as Macquarie Group knocks off Westpac to be Australia’s third largest bank