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Why has the Macquarie share price had such a lacklustre start to August?

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The Macquarie Group Ltd (ASX: MQG) share price is down 2.6% this week but up 4.6% over the past month. So, why the lacklustre start to August?

Did the interest rate rise have an impact?

The S&P/ASX 200 Financials Index (ASX: XFJ) is up 0.66% over the past five days. The big news of the week was the Reserve Bank of Australia (RBA) lifting interest rates for a fourth consecutive month.

The RBA Board lifted the rate by 50 basis points. This was the third rise of this size in consecutive months to take the cash rate to 1.85%. On the day of the rate rise, the Macquarie share price lost 0.46%.

The RBA is raising rates to help bring inflation down. Inflation is currently running at 6.1% per year.

As my colleague Bernd reported this week, higher rates mean larger net interest margins (NIMs) for the banks. This means they can simply charge more interest on their variable loans.

But higher rates can also lead to more bad debts, along with fewer new mortgages as the property market cools.

Looking at the share price performance of the big four, we see a mixed bag of results alongside Macquarie this week.

Since the market close on Friday 29 July, there’s been a 1.9% gain for Westpac Banking Corp (ASX: WBC) shares. Commonwealth Bank of Australia (ASX: CBA) shares got an 0.8% bump.

National Australia Bank Ltd (ASX: NAB) shares gained 0.65%. Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares dipped 0.26%.

Of the ASX 200 bank shares, JP Morgan reckons CBA is “most leveraged to a rising cash rate”, enabling it to squeeze the most out of increased NIMs as rates go higher.

Perhaps a broker note from Goldman Sachs last Friday has taken some wind out of Macquarie’s sails.

As my Fool colleague James reported, its analysts retained a neutral rating on Macquarie. They also trimmed their price target on Macquarie shares to $194.03.

This is despite them being pleased with Macquarie’s performance during the first quarter.

Goldman commented:

MQG 1Q23 performance was solid, which despite difficult conditions, was up on a strong pcp with annuity style businesses up significantly and capital markets facing businesses up slightly.

That said, management noted conditions did soften during the quarter and did update its divisional guidance, which implied broadly consistent Group NPAT to our previous forecasts.

While it believes Macquarie’s growth outlook is strong, Goldman expects the bank to report a decline in profits in FY23.

They say the Macquarie share price is at a premium to long-term averages, hence the neutral rating.

Other brokers are bullish. James also reports that Morgans has an add rating on Macquarie shares with a price target of $215.

Morgans likes Macquarie because of its exposure to long-term structural growth areas. The broker also thinks Macquarie’s trading businesses are well-placed to profit in the current volatile markets.

Morgans explained:

We continue to like MQG’s exposure to long-term structural growth areas such as infrastructure and renewables. The company also stands to benefit from recent market volatility through its trading businesses, while the company continues to gain market share in Australian mortgages.

The Macquarie share price is down 16.5% in the year to date.

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