Macquarie Bank has become a case study for the profitability of green investing, after it overtook Westpac to become Australia’s third-largest bank by market capitalisation on Wednesday.
The bank, better known to fundies across Australia as the “millionaires’ factory”, has seen shares soar 1.5% to $208.39 a piece so far this year, after more than doubling first-half profits last year.
On Wednesday, Macquarie’s market capitalisation crept just shy of $80 billion to overtake Westpac, which ended trading with a market cap of $79.5 billion, ahead of ANZ only marginally, with a market cap $78.9 billion.
Analysts say the bank has now turned the corner on its post-GFC coming-of-age period, which saw it re-enter the market as a stock standard investment bank.
Since then, Macquarie has doubled down in reinvention, making efforts to become a world-leading asset manager while building out a competitive retail banking offering, and collecting climate-friendly investing bona fides.
Andrew Stadnik, an analyst at Morgan Stanley, said it’s possible Macquarie could have the best green investing capabilities of all alternative asset managers on the global market.
“We think Macquarie will generate superior earnings growth on a medium-term view,” Stadnik said. “Furthermore, it should command a green-premium multiple or a lower cost of capital.”
The bank has made no secret of making its climate-focused intentions, either.
The voice of Macquarie’s chief executive Shemara Wikramanayake ended up being one of Australia’s most prominent at Glasgow’s COP26 climate summit last year, where she pitched the financial services sector’s opportunity to do right by the environment, as her Prime Minister stood quiet.
And in the months before that, she was one of the founding members of the Glasgow Financial Alliance for Net Zero in April last year.
Ahead of Macquarie now are National Australia Bank, which has a market cap of $95.4 billion, and the Commonwealth Bank of Australia, which stands well ahead of the pack with a mammoth market cap of $173.3 billion.
Matthew Davison, analyst at Martin Curry, said the Macquarie’s rise offers itself as a case study in the “superior execution” of securing major mortgage volumes and taking advantage of green investing trends.
“An example of that execution track record is in Australian mortgage volumes, which has been in direct contrast to ANZ and Westpac,” he said.
“However, of most significance has been the re-rating of the stock’s earnings multiple to reflect the group’s ‘green’ credentials and ability to monetise some of the investment opportunities from ‘decarbonisation’ trends globally.”
In contrast, mortgages have been a major pain point for both Westpac and ANZ over the last year.
So much so that Macquarie’s ability to overtake ANZ’s market cap in November last year gave much of the sector reason to suggest the era of Australia’s big-four dominance had drawn to a close. Now, there’s a fifth.