Macquarie lifts profit guidance, flags 10pc full-year growth

Macquarie Group expects to outstrip last year’s record $2.2bn annual profit following “satisfactory” trading conditions.

Macquarie CEO Nicholas Moore. Pic: Kym Smith

Macquarie Group has flagged a 10 per cent rise in its annual profit after what it said were “satisfactory” trading conditions across its operations in the latest quarter.

In an operational briefing today, Macquarie said it expects its full-year result for the year to March 31 to be about 10 per cent up on the 2017 financial year, when the group booked a record $2.2 billion full-year net profit.

The investment bank and asset manager (MQG) has a reputation for providing conservative guidance to investors.

It said contributions to profit from its annuity-style businesses were up slightly in the three months through December and higher over the first nine months of its financial year. That was mainly due to stronger performance fees, the timing of transactions in its corporate and asset-finance arm and continued growth in financial services, it said.

It countered a weaker contribution from its capital markets-facing businesses for its third quarter and year-to-date.

As recently as late October, Macquarie forecast its full-year profit would be slightly up on the year before.

“Macquarie remains well positioned to deliver superior performance in the medium-term due to our deep expertise in major markets, strength in diversity and ability to adapt the 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,” said chief executive Nicholas Moore.

“Trading conditions across the group were satisfactory in the December 2017 quarter.”

Macquarie said its short-term outlook remained subject to market conditions as well as potential regulatory changes and tax uncertainties.

Macquarie Asset Management had $483.5bn in funds under management at December 31, up 2 per cent on 30 September, due to a positive market. Its infrastructure and real estate arm raised more than $7bn in new equity while the asset management arm was awarded $4.6bn in new funded institutional mandates.

The capital markets business, which includes Macquarie Capital, booked a net contribution to the group down on the same period a year prior, due to the timing of income recognition associated with transportation and storage agreements within the commodities and global markets business.

Despite the lower net contribution for the nine months to December compared to the previous year, the company said its Macquarie Capital business experienced strong levels of activity during the quarter driven by advisory activity in infrastructure and energy, as well as advisory and debt capital markets activity in the Americas and Europe.

The group reported that its financial position far exceeds APRA’s Basel III regulatory requirements, with a capital surplus of $4 billion at December 31, broadly in line with the previous quarter.

Macquarie has shifted since the global financial crisis toward more reliable asset-management, financing and commercial-banking operations to cushion volatility in investment banking and trading. Its annuity-style operations now contribute the bulk of earnings. Last year it hired former Reserve Bank of Australia Gov. Glenn Stevens as a board director.

The bank in late October launched plans to return excess capital to shareholders through an $1 billion buyback of its own shares. No shares were purchased over the last quarter, but Macquarie said the program remained active.

With Robb M Stewart