There are lots of different ASX bank shares for Aussies to choose from, but nearly all of them offer very similar financial products.
Think about the numerous listed competitors in the lending space, such as Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), ANZ Group Holdings Ltd (ASX: ANZ), Bank of Queensland Ltd (ASX: BOQ), Bendigo and Adelaide Bank Ltd (ASX: BEN), Pepper Money Ltd (ASX: PPM) and MyState Ltd (ASX: MYS).
Then there are many non-ASX competitors like ING, HSBC, Athena and more.
With such a competitive banking space, one name appeals to me the most: Macquarie Group Ltd (ASX: MQG), for three key reasons.
Segment diversification
Macquarie is a very diversified business when it comes to its operations.
When I think about names like Westpac, CBA and BOQ, they earn a large amount of their profit from lending to households, and some of the profit comes from business and institutional banking. Ultimately, most of their profits relate to lending.
Macquarie has four main divisions, one of which is its banking and financial services (BFS) segment. According to my colleague Zach Bristow's reporting, Macquarie's banking operations are growing quickly.
In July, Macquarie's mortgage book growth was 1.6%, five times faster than the overall banking system. This reportedly led to its market share of owner-occupier and investor lending growing to 5.5%.
But Macquarie is much more than that.
It has three other divisions – investment banking, asset management, and commodities and global markets (CGM).
This gives shareholders protection if one sector has a rough year, and it also gives Macquarie the potential to invest in whichever segment it sees as having the best growth opportunities.
Global business
Another advantage that Macquarie has over the local ASX bank shares is its global operations.
Macquarie generates approximately two-thirds of its income from international sources. The Americas account for around a third of its income, Europe, the Middle East and Africa (EMEA) for just under a quarter, and Asia currently accounts for 9% of total income.
This global exposure means Macquarie isn't reliant on one economy to make profits. It gives it more geographic exposure.
Another benefit of having global operations is that Macquarie can invest anywhere it wants to in the world to make the best returns.
Australia's banks are stuck in Australia and New Zealand with a relatively small number of customers.
Earnings growth
Plenty of ASX bank shares are struggling to increase earnings due to competition from each other and brokers, higher funding costs, and limited demand for credit in the current high interest rate environment.
I believe the Macquarie share price is the most compelling option in the sector because of its long track record of compounding earnings growth and the projection that net profit can keep rising over the next several years.
According to UBS, Macquarie is projected to grow its net profit to $4 billion. That puts the Macquarie share price at approximately 21x FY25's estimated earnings.
UBS is forecasting that Macquarie can grow its net profit each year to FY28 when it's projected to make $5.6 billion of profit, a rise of 38% over that time period. CBA, widely seen as Australia's best bank, is only projected to see profit growth of 9% between FY25 and FY28.
For me, Macquarie shares are a much more appealing ASX bank share option for the long term.
