Macquarie posts annual record profit of $2.56bn, up 15pc

A rise in fees and commissions helped push Macquarie Group’s profit up 15pc to $2.56bn, and it expects a steady year ahead.

Macquarie CEO Nicholas Moore. Pic: John Feder

A rise in fees and commissions helped drive Macquarie Group to a fresh record annual profit, though the Australian asset manager and investment bank has forecast a steady year ahead.

Macquarie’s profit for the just-ended financial year beat expectations, driven in part by higher fee income from managed funds and assets that outperformed benchmarks.

Still, in the second half of the year, it was the bank’s capital-markets facing operations that helped buoy overall earnings, as commodities and global markets businesses and its Macquarie Capital arm outperformed other divisions.

For the new financial year, Macquarie said it expected its profit would be “broadly in line” year-over-year.

In late October, Macquarie said it would tap a capital surplus to buyback some of its shares. No purchases were made since, but the bank said the program remains in place.

Added to that, the bank recorded lower impairment charges and provisions across most of its businesses.

Net profit rose by 15 per cent to $2.56 billion in the recent financial year from $2.22 billion the year before, Macquarie said.

The company (MQG), which has a reputation for providing conservative guidance to investors, in February said it anticipated an about 10 per cent rise in its annual profit.

Profit in the second-half of the financial year was $1.31 billion, up 5 per cent over the prior six months and 12 per cent ahead of the same period a year earlier.

Macquarie, which began as a subsidiary of London merchant bank Hill Samuel & Co. and opened its first office in Sydney in 1970, 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.

The past year highlighted Macquarie’s global platform and diverse business mix, managing director and chief executive Nicholas Moore said.

Macquarie said it would pay a final dividend of $3.20 a share, a rise of 14 per cent on a year earlier and marking a full-year payout of $5.25.

For the past year, net operating income was up 5 per cent to $10.92 billion, outpacing a 3 per cent increase in expenses. Net interest and trading income was steady on the previous year, while fee and commission income was up 8 per cent at $4.67 billion and operating-lease income was 2 per cent higher at $935 million.

The asset management division contributed a profit of $1.69 billion, 10 per cent higher than in the prior year, while corporate and asset finance profit was 1 per cent higher on-year at $1.21 billion. Assets under management at the end of March stood at $496.7 billion, up 3 per cent on the year before.

Profit contributed by Macquarie’s operations in commodities and global markets fell 6 per cent for the year to $910 million, but Macquarie Capital profit jumped 45 per cent to $700 million as investment-income realised from energy and infrastructure projects and fees from debt markets in the U.S. climbed.

Macquarie remains well funded and its balance sheet conservatively managed, and the bank continued to look at diversifying funding sources, chief financial officer Alex Harvey said. The company’s financial position exceeded Australian regulatory requirements, with a capital surplus of $4.2 billion at the end of March.

Dow Jones Newswires