Macquarie Group profits set to jump as traders thrive in tough times

Last year’s wild recovery in energy prices has already helped Macquarie report stronger third quarter commodities income, and Russia’s invasion of Ukraine has only added to the energy pricing deck. Picture: Getty Images

Banking bosses make few friends for saying so, but troubled times are good for traders – and Macquarie Group’s full-year financial results are likely to underline that fact, according to JPMorgan analysts.

While noting that Macquarie has not provided full-year earnings guidance, JPMorgan analyst Andrew Triggs said in a client note on Friday he expected Macquarie to book net profits of $4.5bn, up about 50 per cent, largely driven by a strong lift in returns from the company’s Commodities and Global Markets division.

Last year’s wild recovery in energy prices has already helped Macquarie report stronger third quarter commodities income, and Russia’s invasion of Ukraine has only added to the energy pricing deck – along with some extraordinary volatility elsewhere.

JPMorgan is forecasting a $2.1bn second-half profit in its CGM division – before tax and bonuses – so take a well-deserved slice off for bonuses if anyone at Macquarie thought to take on a couple of big new nickel and LNG positions sometime in late February.

That would be up 24 per cent on the result from the first half of Macquarie’s financial year.

That comes along with expectations of a $1.5bn pre-tax, pre-bonus profit from Macquarie Capital, about $938m in asset management profits, along with some solid growth in the less sexy banking and financial services arm.

“Commodities net investment income and trading income has historically exhibited a high correlation with changes in gas/oil price volatility,” Mr Triggs told JPMorgan clients.

“Given the recent spike in natural gas, we think this will drive stronger trading revenues, likely seeing upside risk to Macquarie Group’s own outlook commentary for commodities income to be ‘significantly up on FY21’.” Mind you, probably not a difficult call in the light of comments made by Glencore boss Gary Nagle late last week, who is apparently so confident of the beneficial impact of troubling global times he was able to tell shareholders – after only a single quarter of the year – that he expected the global mining and trading giant’s marketing arm to “comfortably exceed” the top end of its guidance.

“Extrapolating our first quarter performance would see our marketing segment’s full-year earnings comfortably exceeding the top end of our long-term adjusted EBIT guidance range,” he said.