The Macquarie Group Ltd (ASX: MQG) share price is up 11.5% this year to $93.02 as it continues its multi-year bull run since slipping to a low of $16.98 in February 2009 during the global financial crisis.
Since then, the company has seen its share price climb higher and this may continue for the following reasons:
- Trump trade. Roughly 27% of Macquarie's income comes from the U.S. where it could benefit from the proposed tax cuts in that country. President Donald Trump announced a proposal to slash the US corporate tax rate to 20%, down from the present rate of 35%. With 63% of Macquarie's income generated abroad, it also stands to gain should the Australian dollar weaken against other major currencies.
- Stable sources of income. With 70% of its FY 2017 net profit coming from annuity style businesses, Macquarie is better placed than it has been previously to withstand turbulent markets which would affect its capital markets business. At a time when the big four banks are selling off their wealth management arms, Macquarie's diverse capabilities might make it a better bet than the Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB).
- Macquarie's highly incentivised staff have earned it the nickname "the millionaires factory". Its remuneration policies ensure that there is goal alignment with shareholder interests, and staff are motivated to achieve the highest possible returns for shareholders. Shaw and Partners analyst David Spotswood summed it up earlier this year with a broker note titled "Get Long Greedy Bankers".
- Macquarie's strong balance sheet and excess capital beyond regulatory requirements also provide it with a stable platform from which it can expand its operations as shown by its acquisition of the UK Green Investment Bank Limited for £2.3 billion which was completed in August 2017. Whilst Macquarie is the largest Australian investment bank, it is smaller than its global peers and has the capacity to continue its expansion going forward.
Whilst Macquarie's performance will be reliant on market conditions, it remains a quality business to add to the long term investor's portfolio as its share price run since the global financial crisis has shown.
