In the starkest warning yet that bank profits could be set to take a downturn, Commonwealth Bank of Australia (ASX: CBA) reported this morning that its profits rose just 0.5% in the past twelve months.
This follows on from an anaemic 2% lift announced by Westpac Banking Corp (ASX: WBC) earlier this week. It is unlikely that National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) will majorly outperform the other big banks either.
As a result, Macquarie Group Ltd (ASX: MQG) is looking increasingly attractive compared to its big four brethren.
Here are 4 reasons why:
- Profits are still growing
Macquarie Group reported a 57% increase in net profit just last week, and the diversity of its income streams provide some additional diversity compared to our Aussie-centric big banks. I consider there is a fair chance profits will take a hit in the next few years, but there's plenty more to like:
- International profits
Just 30% of Macquarie's net operating income came from Australia in 2015, with 22% coming from Europe, Middle East and Africa (EMEA), 36% from the Americas, and 12% from Asia. Unlike ANZ and the other banks, Macquarie has successfully entered and succeeded in foreign markets.
These offer ample opportunities for growth in future, at a time when our domestic banks could struggle as the economy slows down.
- Dividends
OK so 4.1% partly franked isn't as good as the yield on offer from the big banks, but with Macquarie still growing and the big banks possibly facing dividend cuts, Macquarie Group isn't a bad income option.
- Long-term growth
Macquarie is in a good place to deliver growth over time to shareholders. As one of the world's 50 largest fund managers and with a presence in most markets worldwide, Macquarie also has access to a lot of opportunities that Australian-focussed banks simply don't get.
While the near term could get rocky if markets crash or the Australian economy worsens, Macquarie Group remains a sound long-term investment.
