Shares in Australian investment bank, Macquarie Group (MQG) finished on a three-year low of $48.55 today after the company said it will wind-back its residential mortgage business due to funding costs.
The bank said it will “substantially reduce” origination of new residential mortgages in Australia from 7 March 2008, but would continue to provide full service to Macquarie’s existing Australian customers who hold 95,000 loan facilities.
“There will no impact on these customers and we will continue to provide them the range of existing customer service including mortgage variation services,” Head of Macquarie’s Banking and Financial Services Group, Peter Maher said.
“It will be business as usual for our existing customer base.”
“New mortgage business will continue to be written although it will be at much reduced volumes,” he said.
Macquarie has about 2.5% of the total outstanding housing loans markets in Australia through its subsidiary Macquarie Securitisation Limited.
“As noted by numerous market participants, deteriorating conditions in these markets over the past six months have resulted in a sharp rise in the cost of funding mortgages and significant reductions in the availability of funding from both the domestic and international mortgage securitisation markets,” Maher said.
Given the current conditions in the global credit markets and low investor sentiment, Macquarie Bank’s share price has suffered a similar fate to other big banks in Australia, falling nearly 40% since its high of $83.59 in January.
In today’s statement to the market, the bank re-affirmed it has no exposure to the subprime loans.
“We have also previously advised that the mortgage business has no sub-prime exposure, default rates are low and the credit quality of the portfolio is good,’ chief financial officer Greg Ward said.
He said the retail and wholesale residential mortgage businesses represented less than once percent of Macquarie Group profits.
The impact of the decision to wind-back the business is not financially material” he added.
