Macquarie Group ‘on track’ to match last year’s record profits

Macquarie says it’s still confident of matching last year’s record profits, as it downplayed a mixed first quarter.

The (Ian Waldie/Bloomberg)

Macquarie Group has maintained its outlook for fiscal 2017 earnings in line with the prior year’s performance despite its operating groups underperforming against last year’s corresponding numbers for the first quarter.

In an update given to investors at its AGM this morning, the investment bank (MQG) said its divisions were meeting expectations so far this year as the weaker comparative result was put down to a particularly strong first quarter in FY2016.

The mixed first quarter numbers still represented an improvement from the fourth quarter of the 2016 financial year.

The meeting of expectations saw the group reaffirm projections to match last year’s record profit result of $2.06 billion.

The company, which runs a financial year that ends on March 31, reported in May that its FY2016 profit had risen 29 per cent, comfortably meeting guidance for an improved result from the prior year.

Macquarie said its annuity-style businesses had retained momentum through the first quarter, with its capital markets operations lagging.

The latter was pinned on volatile trading conditions, with the June quarter impacted by both the Federal Election at home and the Brexit vote in the UK.

Its high-profile investment banking arm — Macquarie Capital — was hurt by the volatility, with Macquarie chief executive Nicholas Moore noting a drop off in activity compared to last year.

“Macquarie’s annuity-style businesses, which represent more than 70 per cent of the group’s performance, continued to perform well,” he said ahead of the AGM in Sydney.

“Macquarie’s capital markets facing businesses experienced mixed trading conditions with subdued market conditions in Macquarie Capital and Macquarie Securities Group as previously foreshadowed, particularly compared to a strong prior corresponding period.”

In all, 108 deals were completed at $28bn in the Macquarie Capital division, down on last year but ahead of the number seen through a lacklustre fourth quarter.

The bank’s securities arm “experienced lower volumes”, with Asia particularly quiet.

Mr Moore said the short-term outlook was clouded by uncertainties around market conditions and regulatory changes, but he was confident the group would see growth in the medium-term.

“Macquarie remains well positioned to deliver superior performance in the medium-term due to its deep expertise in major markets, strength in diversity and ability to adapt its portfolio mix to changing market conditions, the ongoing benefits of continued cost initiatives, a strong and conservative balance sheet and a proven risk management framework and culture,” he said.

The investment bank had assets under management of $496.9bn as of June 30, up 4 per cent from the end of the March quarter.

Its tier-one capital ratio was at 10.3 per cent as of June 30, exceeding regulatory requirements.