Macquarie Group's resilient performance in face of earnings slide

Company News

by Glenn Dyer

Macquarie Group (ASX:MQG) has kept shareholders happy with a cut to the annual dividend much smaller than the 32% slide in full-year earnings the financial giant revealed on Friday morning.

The country’s leading investment bank told the market that it had earned a profit of $3.522 billion for the year to March - a result a bit stronger than thought a few months ago after the slump in first-half earnings.

From what the bank said, the stronger-than-expected result (at least a few months ago) was driven by a record performance in the company’s commodities and markets businesses.

That showed in the second half where the rebound repaired some of the damage from the 39% slide in first-half earnings to $1.34 billion.

That saw the group reporting net profit for the six months of $2.107 billion, up 49% from the first half but still down 27% from the booming second half a year ago.

The full-year dividend was cut to $6.40 a share from 2022-23’s $7.50 a share with a final of $3.85 a share, down from $4.50 a year ago.

CEO Shemara Wikramanayake said in Friday’s ASX release that, “Despite ongoing economic uncertainty and subdued market conditions in many parts of the world, Macquarie’s client franchises remained resilient over the last year, with continued client growth, fundraising, and new business origination across the Group as we delivered our 55th consecutive year of profitability since inception.”

Directors said in Friday’s release that the group’s annuity-style activities, in its Macquarie Asset Management (MAM), Banking and Financial Services (BFS), and certain businesses in Commodities and Global Markets (CGM), generated a combined net profit contribution of $3.01 billion, down 27% from the previous year, "which was primarily due to lower asset realizations in green investments and continued investment in the development of green energy portfolio companies in MAM.”

The group’s Markets-facing activities in Macquarie Capital and most businesses in CGM delivered a combined net profit contribution of $3.67 billion, down 40% "which was notably characterized by exceptional levels of volatility in commodity markets that drove a record FY23 performance from CGM.”

Net operating income of $16.887 billion fell 12% from 2022-23 FY23, while the group said its operating expenses of $12.061 million were broadly in line with FY23. International income accounted for 66 percent of Macquarie’s total income.

Assets under management at March 31 were $A938.3 billion, up 7% from $A878.6 billion a year earlier largely due to favorable market movements, investments made by MAM Private Markets-managed funds, and favorable foreign exchange movements, partially offset by assets no longer managed as a result of a reduction of co-investment management rights.

Macquarie said it has surplus capital of $A10.7 billion at March 31, return on equity fell to a still solid 10.8% in 2023-24 because of the earnings downturn, from the very high 16.9% the year before.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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