Here’s why JP Morgan sees more growth in Macquarie (ASX:MQG) shares

a group of business people in business attire join their hands in the middle of a circle in a team celebration as they smile broadly in celebration of a milestone event.

Shares in Australian investment bank Macquarie Group Ltd (ASX: MQG) have eclipsed the $200 per share barrier once more in early trade. They are currently up 2.62% from the open at $200.77 after reaching $201.50 earlier in the session.

The milestone marks the second move beyond the prestigious $200 per share mark, after the bank first hit the target late last month.

While there’s been no market sensitive information out of Macquarie’s camp today, here we uncover what’s been keeping its share price so top-heavy lately and what the experts are saying about it.

What’s up with the Macquarie Bank share price lately?

Macquarie advised it had successfully completed an equity raise of $1.5 billion via an institutional placement on Monday.

The funds are said to strengthen the bank’s balance sheet while offering additional flexibility to invest in new opportunities as they arise.

Shares were offered to institutional investors at $194 per new share, a 3.3% discount from the company’s current share price.

A share purchase plan (SPP) is set to follow the institutional placement, allowing existing shareholders to apply for an additional $30,000 of Macquarie shares.

Aside from this, the bank also released its interim report for the first half of FY22 where it recognised a robust performance.

For instance, it grew its first half net profit by 104% to $2.04 billion and expanded its assets under management (AUM) by 31% to $737 million.

This enabled the board to announce a partially franked interim dividend of $2.72 per share, an increase of 101% from the previous year’s interim dividend of $1.35 per share.

On this performance, analysts at leading investment bank JP Morgan have since chimed in with their opinion, also offering their outlook on the Macquarie share price.

Why is JP Morgan bullish on Macquarie shares?

The team at JP Morgan were impressed by the bank’s preliminary results, particularly with the performance of its Commodities and Global Markets (GCM) segment.

This was the ‘standout feature’ for the broker, given the segment delivered a 60% year on year growth in net profit after tax (NPAT) contribution.

As commodity markets continue to run hot, alongside Macquarie’s active portfolio management style, the broker expects the bank to continue growing over the coming periods.

This bodes in well for the company’s share price, according to the broker.

Specifically, JP Morgan expects Macquarie to achieve approximately 18% NPAT growth in FY22, calling for $3.56 billion at the bottom line for the bank this financial year.

Looking further ahead, it sees Macqaurie’s “annuity divisions driving strong medium-term growth, with MAM well placed to benefit from structural demand for alternative asset classes”.

It also reckons that Macquarie Investment Management (MIM) is poised to benefit from the Waddell & Reed acquisition.

At the same time, it believes the bank’s Banking & Financial Services (BFS) division has “potential to double the size of the Australian mortgage book over the next three to four years”.

Finally, the broker reckons that growth should be “well supported by the significant capital into all operating divisions that occurred in 2HFY21”.

Not only that, it forecasts a return on equity (ROE) of 15-16% in years FY22-24, meaning the bank’s “valuation looks attractive”, according to the note.

As such, it has a price target of $207 on Macquarie shares, implying an upside potential of more than $6 a share on the current market price.

Macquarie shares have climbed almost 54% in the last 12 months after rallying 45% this year to date.

The post Here’s why JP Morgan sees more growth in Macquarie (ASX:MQG) shares appeared first on The Motley Fool Australia.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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