Reporter's view: Macquarie needs a stronger 2H to keep market happy
Make us a preferred source
Make us a preferred source on Google
Reporter's View: Associate editor for banking and finance Andrew Cornell writes:
Macquarie has outperformed the strong financials sector since September with its shares up 5% compared with just over 1% across the financial sector, but today’s half year has brought it back to the pack.
Its shares were 4.25% lower to $221.67 by 11:53pm AEDT.
That’s more to do with timing of asset realisations and surprisingly low volatility in commodity markets, despite geopolitical tensions, but it means a lot more depends on an even stronger second half for the market to be happy.
According to Visible Alpha consensus, the result missed by 6.7% and UBS’s John Storey told clients Macquarie now needs to deliver $2.5 billion in second half net profit after tax — which depends on asset realisations from key portfolios.
Macquarie’s second half is historically stronger but Storey says the bank needs to deliver full year consensus earnings of $4.1 billion, which would make it the third best half on record.
Beyond the timing of realisations and always uncertain volatility framework, analysts didn’t call out any major concerns in today’s management briefing and indeed, rarely for a complex entity like Macquarie, the session barely used up half its allotted time.
In her outlook, chief executive Shemara Wikramanayake said for banking and financial services “we expect to see ongoing growth in our loan portfolios, our deposits, our platform volumes but that will continue to be impacted by market dynamics that will drive margin pressures. We will also continue our investment in digitisation and automation”.
“For commodities and global markets, we expect commodities income to be down, but that is subject to volatility that may create opportunities as ever,” she said.
“Over the medium term we think we remain well positioned to deliver superior performance. And that is because the mix of businesses we have give us very good diversification, but we are also very well structurally positioned for growth.”
For a bank that is very much a growth proposition, that’s the treadmill the market expects Macquarie to keep running on.
Macquarie Group shares fall on HY earnings
More news: Macquarie shares sank at market open on the ASX after the investment banking and financial services group reported a 23% decline in half-year profit compared to the prior six-month period. However, the first-half profit of $1.6 billion was a 14% rise year on year.
Shares were down 4.2% to $221.75 by 10:30am AEDT, having added more than 20% since January.
Macquarie Group posts 14% profit climb for HY
The news: Macquarie Group reported a first-half profit of $1.6 billion, a 14% rise year over year, but marked a 23% decline compared to the prior half-year period.
The numbers: The group posted assets under management (AUM) of $916.8 billion at 30 September, up 3% year on year and down 2% compared to the previous half.
Macquarie declared an interim dividend of $2.60 per share, 35% franked. This represents a rise on last year's interim dividend of $2.55 per share, 40% franked, but lower than the FY24 final dividend of $3.85 per share, 40% franked.
The context: Macquarie said the half-on-half decline in AUM was driven by unfavourable foreign exchange movements, outflows in equity strategies and divestments, partially offset by favourable market movements, increased fund investments and improved asset valuations.
In November 2023, Macquarie launched a $2 billion share buyback. As at 31 October, a total of $1.013 billion shares were acquired as part of the buyback. The group has approved an extension of the program for a further 12 months, "given the strong capital position", it said.
Macquarie said it continues to maintain a "cautious stance, with a conservative approach to capital, funding and liquidity", that positions it well to respond to the current market environment.
What they said: "Macquarie's improved performance this half year was underpinned by improved realisations in Macquarie Asset Management and further progress in the digitalisation programme in banking and financial services, reflecting the ongoing benefits of our diverse business mix," Macquarie managing director and CEO Shemara Wikramanayake said.
The source: ASX announcement
