Macquarie Group's push into mortgages has caused its home loan book to more than double to $9 billion in the past year, as it seeks to exploit the fat profit margins in residential property lending.
The value of Macquarie's home loan book increased 123 per cent from $4.04 billion to $9 billion in the year to July, figures from the Australian Prudential Regulation Authority show. So far this year it has expanded 60 per cent.
While its total market share remains small at 0.7 per cent, the rapid pace of expansion compares with industry-wide annual growth of 6.2 per cent in the value of all outstanding home loans.
The increase comes after Macquarie last year teamed with Mark Bouris-backed mortgage broker Yellow Brick Road, supplying its white label loans and taking a 10.5 per cent stake in the business.
Other brokers also report a sharp increase in the number of customers taking out Macquarie-branded home loans.
Mortgage Choice says that Macquarie's share of new loans being written has risen to 4.6 per cent, from 1 per cent a year ago.
Macquarie chief executive Nicholas Moore has played down the expansion into home loans by highlighting the bank's share of the mortgage market remains small. And its $9 billion portfolio is tiny compared with the loans held by Westpac, the Commonwealth Bank, NAB or ANZ.
However, it now has a larger Australian home loan portfolio than several foreign-owned banks, including Citigroup and HSBC, though it is significantly smaller than regional banks Bank of Queensland and Bendigo and Adelaide Bank.
Bell Potter analyst T.S. Lim said mortgages were likely to provide Macquarie with reliable earnings, and the return on equity available in the sector was strong. "It's an annuity stream - it provides stable income."
He said the investment bank also had access to low-cost funding through cash management accounts - and many of its clients tended to be wealthy and relatively low-risk.
Last month's record profit result from the Commonwealth Bank, driven by a rise in its retail bank, underlined that home loans remained a highly profitable business. Among the big four banks, ANZ and National Australia Bank have been expanding the fastest in the past year. Westpac has been losing market share.
At Macquarie's full-year results in May, Mr Moore played down the mortgage push but said it was a "good business," highlighting that it had been involved in writing home loans since a partnership with Aussie Home Loans in the 1990s.
Despite its recent growth, Macquarie's home loan portfolio has not yet reached the peak size of its now-disbanded mortgage business based on securitisation.
It had as much as 2.5 per cent of the Australian home loan market before the global financial crisis in 2008, when it sharply wound back new lending.
The securitised home loan portfolio, which it is winding down, was worth $4.4 billion in July, down from $7.3 billion last year.