Like much of the Banking Sector, MQG is little changed so far in 2023, but at least its ~4% yield has helped loyal investors who receive a $2.55 dividend, 40% franked, on Monday. MQG has always been regarded akin to a US investment bank as opposed to the traditional “Big Four”, but over recent years, it has increased its penetration into residential mortgages. We see the most upside with MQG while the markets are in a “Risk On” mood, but it’s a business with several moving parts that can suffer sentiment swings when we see investors adopt a more defensive approach.
Last month saw a rare miss by MQG as its half-year profit fell to a 3-year low as costs rose and they booked fewer asset sales, although these are expected to still materialise in time. Also, it said its performance would lift in the 2nd half; it used this optimism and strong balance sheet to justify a $2 billion share buyback, which has supported the stock but not in a meaningful manner.
- We are long MQG but may adopt a more conservative exposure towards the sector 5-10% higher, e.g. take profit on our 6% exposure and top up our ANZ & NAB positions.
MM is long and short-term bullish on MQG
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