Macquarie bullish on commodities as dealmaking falls

The group’s earnings per share of $6.03 was 15 per cent lower than the previous six-month period, but up 7 per cent compared to the corresponding period. Macquarie declared a $3 per share interim dividend that is 40 per cent franked and represents a 50 per cent pay-out of profits.

Traders said the result was a strong one that was ahead of consensus while the outlook for its commodities and global markets unit, that has been supported the group’s profits, was encouraging.

Macquarie says its profit contribution was split evenly between annuity style activities such as banking and asset management, and market facing activities such as investment banking and commodities and global market trading.

Profits declined in the asset management group as the large gains in green energy sector asset realisations were not repeated.

Banking arm grows

Meanwhile, Macquarie’s push to grow its Australian banking operations lifted profits as it won market share in deposits and loans albeit that was accompanied by increased staff and technology costs.

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Profits from market facing activities slipped 18 per cent over six months as weaker markets led to a sharp drop-off in dealmaking activity.

The booming commodities trading units also fell short of what was a stellar half year to March 30, 2022 as clients scrambled to protect themselves from volatile prices.

In fact, Macquarie Capital’s fee and commission income slipped from $1 billion in the six months to March 30, 2022 to $664 million as dealmaking dropped off in the United States and Australia while mark to market losses cut interest and trading income from $256 million to $156 million.

Macquarie’s asset management unit reported a 3 per cent increase in funds under management to $795.6 billion as favourable foreign exchange moves and increased investments in private markets fund offset falls in bond and stock markets.

Macquarie, which launched a high-interest transaction account said it had increased its deposit base by 19 per cent to $116.7 billion, or 4.4 per ent of the market while it expanded its home loan portfolio by 13 per cent to $101 billion, or 4.8 per cent of the market.

The banking unit’s car loan portfolio fell by 13 per cent while its business banking loan portfolio increased by 7 per cent

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International income accounted for 72 per cent of total income in the half year, Macquarie said.

Macquarie said its expected base management fees to be broadly in line in the short term as increased private market fund raisings offsets falling listed markets.

It said its banking unit would continue to grow, but that would be accompanied by higher costs as it reported a 24 per cent increase in operating expenses to $843 million. The costs were as a result of inflation resulting in higher remuneration payments and additional hires to invest in technology and support growth.

Macquarie added that while its margins improved in its banking operations as a result of rising interest rates that was offset by “ongoing lending competition and changes in portfolio mix.”

Shares in Macquarie are 19 per cent lower so far this year and closed on Thursday at $166.54

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