Real-time thoughts & analysis of the markets, economy & more...
Co-founder & CEO of AllenWargent property advisory.
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Pete Wargent blogspot
Co-founder & CEO of AllenWargent property advisory, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.
4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.
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Wednesday, 7 November 2012
Oops - Fifth Pillar on the way for the banking system?
Had a good chortle to myself this morning - the draft manuscript for the second book in my series contained the following sentence (which I have just put a thick black line through):
"The prevailing four pillars system of our banking sector seems to be the favoured approach - it seems unlikely that in the near future new entrants to the oligopoly will be..."
The rumour mill working overtime today suggesting that Macquarie Group may become the said fifth pillar.
"AUSTRALIA could soon have a powerful new player in the world of retail banking, with Macquarie Group believed to be in talks with Mark Bouris' listed Yellow Brick Road Group over a distribution deal that could be unveiled as early as this week.
The deal would give Yellow Brick Road access to the billions of dollars sitting on Macquarie's balance sheet to provide home loans via Mr Bouris' network of more than 140 branches across the country.
News of the proposed tie-up circulated the Birdcage at Flemington on Tuesday, where racing tips and interest rate chatter usually dominate. The key rumour was that Australia's big four banks could soon have a fifth rival knocking on their door.
Well-placed sources revealed that Macquarie would return to the residential home loan business, and in a big way.
As an opening salvo, BusinessDay believes Yellow Brick Road and Macquarie plan to undercut the big four banks by more than a full percentage point on all new home loans.
''This could provide the fifth pillar that our banking sector has always needed,'' said a source close to the deal.
The deal marks a major strategic shift for Macquarie, which has seen many parts of its traditional investment banking model suffer in recent years. Last month Macquarie announced a $361 million profit for the six months to December. Of that Macquarie Capital, which houses the bank's once mighty mergers and acquisitions team, contributed just $10 million.
The bank's equities trading division, Macquarie Securities, notched a $64 million loss. Daily equity volumes for Macquarie were down 23.5 per cent on the previous year.
Announcing the results, Macquarie chief executive Nicholas Moore noted that ''structural change'' was affecting the group's performance.
''There's plainly a degree of structural change taking place in the industry, also structural change in terms of the amount of capacity in the industry,'' Mr Moore said.
The distribution deal with Yellow Brick Road is not Macquarie's first move into the world of retail banking.
In the heady days of 2000, when Macquarie had built a reputation as the ''millionaires factory'', the bank established a retail arm.
One memorable ad featured a picture of a woman in front of the words: ''I used to want to marry a millionaire. Now I want to become one.''