A fifth pillar? ... Australia's big four banks could soon have a new rival. Illustration: Karl Hilzinger
AUSTRALIA could soon have a powerful new player in the world of retail banking, with Macquarie Group believed to be in talks with Mark Bouris' listed Yellow Brick Road Group over a distribution deal that could be unveiled as early as this week.
The deal would give Yellow Brick Road access to the billions of dollars sitting on Macquarie's balance sheet to provide home loans via Mr Bouris' network of more than 140 branches across the country.
Shares of Yellow Brick Road were put into a trading halt this morning. The company said it was aware of media speculation of a "potential distribution deal with a major Australian financial institution" and that it expects to make an announcement on this issue before the start of trading on Friday.
News of the proposed tie-up circulated the Birdcage at Flemington on Tuesday, where racing tips and interest rate chatter usually dominate. The key rumour was that Australia's big four banks could soon have a fifth rival knocking on their door.
Well-placed sources revealed that Macquarie would return to the residential home loan business, and in a big way.
As an opening salvo, BusinessDay believes Yellow Brick Road and Macquarie plan to undercut the big four banks by more than a full percentage point on all new home loans.
''This could provide the fifth pillar that our banking sector has always needed,'' said a source close to the deal.
The deal marks a major strategic shift for Macquarie, which has seen many parts of its traditional investment banking model suffer in recent years. Last month Macquarie announced a $361 million profit for the six months to December. Of that Macquarie Capital, which houses the bank's once mighty mergers and acquisitions team, contributed just $10 million.
The bank's equities trading division, Macquarie Securities, notched a $64 million loss. Daily equity volumes for Macquarie were down 23.5 per cent on the previous year.
Announcing the results, Macquarie chief executive Nicholas Moore noted that ''structural change'' was affecting the group's performance.
''There's plainly a degree of structural change taking place in the industry, also structural change in terms of the amount of capacity in the industry,'' Mr Moore said.
The distribution deal with Yellow Brick Road is not Macquarie's first move into the world of retail banking.
In the heady days of 2000, when Macquarie had built a reputation as the ''millionaires factory'', the bank established a retail arm.
Peter Maher was poached from Westpac, where he was group marketing manager, to run the operation. In total $80 million was invested in computer equipment, and more than $5 million was spent on an advertising campaign to attract retail customers.
One memorable ad featured a picture of a woman in front of the words: ''I used to want to marry a millionaire. Now I want to become one.''
Mr Maher remains head of banking and financial services at Macquarie.
Mark Bouris was unavailable for comment.