Macquarie Group profits squeezed by ‘subdued’ energy markets

Macquarie Group is expecting to rake in less income from its commodities business over the next six months due to lower market volatility, even as the conflict in the Middle East shows no signs of easing and Russia enters into its third year of war in Ukraine.

Those geopolitical tensions would have ordinarily sent oil, gas and energy prices skyrocketing, but Macquarie chief executive Shemara Wikramanayake said the level of volatility had been “subdued”, crimping the investment banking giant’s interim profits.

Macquarie Group chief executive Shemara Wikramanayake. Credit: Bloomberg

Macquarie’s earnings in the six months to September 30 climbed 14 per cent to $1.6 billion compared to the same period a year ago, but they fell short of analysts’ expectations of an interim profit of $1.7 billion. Shares in Macquarie slumped 3.4 per cent to $223.60.

Its asset management delivered profits of $864 million, up 68 per cent compared to a year earlier, on the back of higher performance fees. Its banking division’s profits, which rose 2 per cent to $650 million, were squeezed by competition in the mortgage market.

Macquarie Capital, the investment banking arm that accounts for 12 per cent of profits, took the sharpest hit after earnings tumbled 14 per cent to $371 million due to higher funding costs and the purchasing of global equities.

In a briefing with analysts on Friday morning, Macquarie chief financial officer Alex Harvey said the group expected private credit deals to continue growing in the second half of the 2025 financial year.

However, the commodities and global markets division, which contributed 35 per cent of the interim profit, reported a 5 per cent slump in earnings to $1.3 billion. Wikramanayake said commodities income was expected to fall further as customers in the global gas, power and emissions sectors reduced hedging due to “subdued” volatility.

“Russia-Ukraine when it first happened had a huge impact in terms of particularly gas prices operating in Europe, but Europe was able to respond by bringing down its gas demand … adapting where it had been sourcing the energy, and now it’s actually surplus,” Wikramanayake said.

“And we’re finding that energy markets are very calm. As far as the Middle East is concerned, it hasn’t really impacted oil supply at all, and Saudi Arabia has kept supplying. So we are actually finding that energy markets are quite subdued now because there’s abundant supply and no demand shock.”

Brent crude, the global benchmark, was trading at $US74 on Friday, down 14 per cent over the past 12 months despite the widening conflict in the Middle East. In the aftermath of Russia’s invasion, Brent soared to about $US120.

The asset management and investment banking group declared an interim dividend of $2.60, which will be 35 per cent franked, down from $3.85 in the six months to March 31, although up from the interim $2.55 a year earlier.

It also extended its $2 billion share buy-back for 12 months. Macquarie reported it had bought about $1 billion as of October 31.

Macquarie has $916.8 billion of assets under management, up 3 per cent from last year, but down 2 per cent from the prior half. Its total net operating income rose 4 per cent to $8.2 billion in the six months to September 30.

In a statement to the Australian Securities Exchange, Macquarie said it was maintaining a “cautious stance” given global conditions, including inflation, geopolitical events and interest rates. It also cited potential tax and regulatory changes and foreign exchange as having had an impact on its performance in the second half.

UBS analyst John Storey said the weaker performance in Macquarie’s commodities division was the main reason the group’s first-half results had fallen short of market expectations, and Macquarie’s commentary on the outlook appeared cautious.

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