After having pulled back during the global financial crisis, Macquarie Group (ASX: MQG) has again increased its exposure to the $1.3 trillion mortgage market, taking advantage of the record low interest rate environment and the heating up of the property market.
As reported by The Australian, Macquarie has grown its mortgage lending to $13.8 billion after having teamed up with wealth management group Yellow Brick Road (ASX: YBR). Although that figure is dwarfed in comparison to the likes of Commonwealth Bank (ASX: CBA) – which boasts a mortgage book worth around $330 billion – it is closing the gap with other banks.
For instance, Bank of Queensland (ASX: BOQ) and Bendigo and Adelaide Bank (ASX: BEN) currently have mortgage books worth $26.2 billion and $31.4 billion, respectively, whilst Suncorp's (ASX: SUN) is currently $37.2 billion.
As stated by Michael Russell, CEO of Mortgage Choice (ASX: MOC), Macquarie is becoming "a significant player in the market". After having won just 1.9% of Mortgage Choice's monthly approvals last year, Macquarie last month took 6.1%.
Extending this point, Macquarie's growth over the last three months was an incredible 18% – compared to the average of 1.5% for NAB (ASX: NAB), ANZ (ASX: ANZ), Westpac (ASX: WBC) and Commonwealth Bank – taking its share of the market to 1.1% (of course, the bank's rate of growth is distorted as it came off a lower base than each of the big four, but it is impressive nonetheless)!
The growth in its mortgage lending reflects the bank's attempts to improve its return on equity following years of tough conditions that impacted its investment banking divisions. Whilst further growth in its mortgage book will boost returns, it is believed that the bank's investment division will still provide the greatest returns.
Foolish takeaway
Compared to the big four banks, Macquarie's growth outlook is quite appealing and could result in some very decent returns for shareholders in the medium- to long term. However, investors must also be wary of the sector – although financials have often been seen as safe investments, any significant downturns in the economy could result in losses.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.
