Macquarie eyes opportunities from turmoil as profits hit $2.3b

Macquarie Group boss Shemara Wikramanayake says the investment group is ready to pounce on any opportunities that emerge as the world economy weakens, after the energy crisis helped boosted profits to $2.3 billion in the first half.

Despite weakening conditions on markets and fears of global recession, Macquarie’s half-year profits beat expectations, as the company emphasised its diverse sources of earnings.

Macquarie chief Shemara Wikramanayake said the group would maintain a “a conservative approach” in the current volatile environment.Credit: Bloomberg

Wikramanayake said Macquarie had about $30 billion in “dry powder” of funds that could be deployed in its asset management arm, and significant excess capital in the bank, and it was on the lookout for opportunities.

“What we do with all that capital is empower our teams on the ground to be ready to respond in their particular sub-sector and particular region based on what opportunities open up,” Wikramanayake said.

Senior investment officer at Argo Investments Andy Forster said he thought the company was well positioned for the fragile backdrop, and it could be an opportune time for Macquarie to invest. “They’ve got a pretty conservative balance sheet, and a lot of capital to deploy,” Forster said.

Friday’s result showed volatility in energy prices helped Macquarie’s profits to weather weak financial market conditions, as the company retained its cautious outlook.

Net profits for the six months to September were $2.3 billion, 13 per cent higher than the same half last year and ahead of market expectations, but 13 per cent lower than the six months to March this year.

Analysts said a highlight was the performance of its commodities and global markets division, where the bank profited from clients hedging in the gas, power and oil industries. Energy markets have been thrown into turmoil this year by Russia’s invasion of Ukraine, which triggered steep increases in gas and oil prices.

With Australian electricity prices forecast to surge by about half over the next two years, there has been a debate about whether the federal government should intervene to soften the blow for consumers.

Wikramanayake said this was the government’s call, but she noted that European governments had developed a multi-pronged response to soaring energy bills, including steps to curtail demand, and finding alternative sources of energy.

“For Australia the energy impact is bad but not as acute as in Europe. I think it’s a matter for the Australian government to use either any of that range of responses used by the European governments, or other things that they may think are appropriate here,” she said.

Macquarie said the profit contribution from its flagship asset management division was up 28 per cent on the same half last year, helped by asset sales in the green energy sector.

Its banking and financial services division, which houses the domestic retail bank, posted 20 per cent growth in annual profit.

Profits in the commodities and global markets business were up 15 per cent on the same half last year, helped by energy market volatility and increased hedging by clients.

Macquarie Capital, which includes its well-known mergers and acquisitions unit, posted a 12 per cent annual decline in net profit contribution, as it worked on fewer transactions in the half.

Citi analyst Brendan Sproules said the market was likely to upgrade its view on Macquarie’s commodities business, but he said there would be “questioning around the sustainability of the volatility”.

The company declared an interim dividend of $3 a share, which will be 40 per cent franked and paid on December 13. Macquarie shares closed 0.02 per cent lower at $166.50.

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