Macquarie star Nicholas O’Kane to step down as company downgrades profit expectations

Macquarie remains upbeat about its outlook as Simon Wright replaces Australia’s highest paid banker Nick O’Kane at the helm of the financial giant’s biggest money-spinning division.

Macquarie Group said its largest profit contributor, the global commodities trading business, still has the grit and foundations to succeed, even as its unicorn performer and Australia’s highest paid banker resigned from helming the unit.

After 28 years at the Millionaires’ Factory, Nicholas O’Kane, will step down later this month from his executive director role “to pursue opportunities outside Macquarie,” the company said in a statement to the exchange on Tuesday.

In the release, the banking giant also updated its outlook, saying that after an exceptional year in 2023 where the commodities and global markets (CGM) division had driven 60 per cent of its record $5.2bn profit, the unit’s earnings would be “substantially down” in the 2024 financial year.

However, after growing into a huge and diversified global powerhouse, partly under Mr O’Kane’s leadership, CGM would still report a profit close to the $4bn it delivered in 2022, it said.

In an investor briefing following the announcements, chief executive Shemara Wikramanayake said “I really want to thank Nick, it’s been an incredible journey. He’s made a massive contribute contribution and impact”

“I think he has said that it is the depth and capability of that team and how they’re positioned … that gives him comfort to take this step, which he has told the team he’s doing for a range of personal reasons.”

The CGM unit trades a broad range of financial and physical commodities, and also benefits from client demand for financial products to hedge against risks, particularly in periods of high volatility.

From humble beginnings in 2005, Macquarie is now the second largest physical trader of natural gas in North America, only behind BP and ahead of established groups like Shell and ConocoPhillips.

But with volatility “stabilising” in the past three months from previous record highs, risk management revenue had fallen, particularly in the “resources and gas, power, and emissions sectors,” the company said.

Mr O’Kane’s resignation will be effective February 27, after being instrumental in building of the unit from the start as well as its recent success, including posting profits topping $18.7bn since 2018. Mr O’Kane’s earnings have reflected that success, earning $170m from his job at Macquarie over the same period.

Macquarie said the head of the financial markets division within CGM, Simon Wright, will replace Mr O’Kane as head of the unit.

Mr Wright, who has been at the company 35 years, will join the executive committee from April 1.

Ms Wikramanayake also said the company dubbed the Millionaires’ Factory for the huge pay of its executives, had been resilient during the quarter in tough conditions, highlighting the financial conglomerate continued to grow across its four units.

But she said deal-making activity globally was still at historical lows following the sharpest increases in interest rates in generations, while fund managers were also having the most challenging time in 15 years.

“Activity levels are still much lower than they have been, in fact, the lowest in 10 years,” she said.

Macquarie CEO Shemara Wikramanayake and incoming head of the commodities and global markets division, Simon Wright.

Ms Wikramanayake said Macquarie’s franchise was “resilient in ongoing uncertain conditions with continued customer growth, fundraising and new business origination (that was) a feature across all of our businesses.”

Macquarie, valued at $72bn, said lower fees and commissions at its investment banking unit, Macquarie Capital, had only been partially offset by investment-related gains.

The previous year, the Russian war in Ukraine had triggered market volatility in oil and gas markets that delivered a boon for the unit headed by Mr O’Kane, the biggest contributor to last year’s $5.18bn full-year record profit.

Mr O’Kane’s $57.6m remuneration package then made him the highest-paid executive in the entire Australian banking industry, overtaking Ms Wikramanayake, who took home $32.8m, and even Wall Street executives including JPMorgan CEO Jamie Dimon.

On Tuesday, Macquarie also updated guidance in each of its four units for the full year ending March 31, downgrading expectations at Macquarie Asset Management (MAM) and Macquarie Capital.

It said net operating income at its massive $882.5bn MAM unit would now be “substantially down” compared to the same period last year – as opposed to the “broadly in line” guidance the company had given in November.

The company said transaction activity at Macquarie Capital for the full year would be “slightly down” than in 2023, as opposed to earlier guidance of “broadly in line”. The silver lining was that investment-related income would be “significantly up” on the first half of the year, and not “broadly in line” as previously guided.

Guidance for the banking and financial services (BFS) unit and CGM did not change.

Growth in the banking unit was expected to continue, while the commodity trading unit would have a much more subdued year following the 2023 bonanza, but earnings would still be in line with those posted in the 2022 financial year.

Barrenjoey banking analyst Jonathan Mott said the update had been soft and would likely lead to single-digit downgrades to consensus earnings for the year.

Mr O’Kane leaving the Macquarie’s CGM unit was also “a surprise,” Mr Mott told clients in a note. “He is highly regarded by the market.” But he said Macquarie’s outlook for the unit was actually quite positive.

Shares fell as much as 4.3 per cent in the morning session after the update, but recovered to close only 1 per cent lower at $186.3 each.

The update comes after Macquarie last November posted a 39 per cent plunge in interim earnings to $1.4bn in the first six months of the financial year, missing market expectations by a long shot.