Macquarie Group first-half $1.6bn profit misses expectations, cautions on commodities

Macquarie’s interim profit has increased, buoyed by higher performance fees, but the result fell short of expectations and the company cautioned that softer commodities income was likely.

Macquarie Group CEO Shemara Wikramanayake will front investors and analysts on Friday as she hands down the company’s interim results. Picture: John Feder/The Australian.

Macquarie Group’s interim profit has increased to $1.61bn, buoyed by higher performance fees, but the result fell short of analysts’ expectations and the company cautioned of softer commodities income.

The asset management, commodities and investment banking giant reported a 14 rise in net profit to $1.61bn for the six months ended September 30, up from an almost $1.42bn profit in the same period a year earlier.

Analysts had expected Macquarie to post an interim profit of $1.7bn. The earnings miss saw investors punish Macquarie’s stock in Friday mid-morning trading, with the shares slumping 4.3 per cent to $221.46 after touching an eight-week low.

“The weaker-than-expected result is coming from softer CGM (Commodities and Global Markets) revenues/profits, mostly commodity risk management related, with Macquarie calling out lower vol (volatility) in oil and gas energy markets,” UBS analyst John Storey said.

Barrenjoey analyst Jon Mott said in light of Macquarie’s result he anticipated consensus estimates would be cut by 5 per cent to 7 per cent for the company’s full-year profit, taking into account factors such as softer results in commodities and a higher tax rate.

Ahead of Macquarie’s interim result analysts were expecting a full-year profit of $4.1bn for the year ended March 31, 2025.

Macquarie’s board on Friday declared a interim dividend of $2.60 per share, 35 per cent franked, down from a final payment of $3.85 six months earlier. The interim dividend was, however, higher than the $2.55 payment declared a year ago.

Macquarie extended its $2bn on-market share buy back for a further 12 months. As at October 31, the company had purchased about $1bn under the program.

In a move that may disappoint investors, Macquarie chief executive Shemara Wikramanayake did not provide detailed earnings guidance for the group’s earnings in the full year, ended March 31.

“Macquarie’s improved performance this half year was underpinned by improved realisations in Macquarie Asset Management and further progress in the digitalisation programme in Banking and Financial Services, reflecting the ongoing benefits of our diverse business mix,” she said.

“Macquarie continues to maintain a cautious stance, with a conservative approach to capital, funding and liquidity that positions it well to respond to the current environment.”

Macquarie’s divisional guidance warned of lower commodities income in its biggest unit - by earnings contribution - the Commodities and Global Markets arm. It had previously flagged that commodities income would be “broadly in line” with the prior corresponding period.

The group on Friday said it expected flat investment-related income in its investment banking arm, Macquarie Capital, “supported by growth of the

private credit portfolio and asset realisations”. That was a downgrade from its prior guidance that investment-related income was expected to be higher.

Ms Wikramanayake reiterated that the group expected transaction activity “to be significantly up” in areas spanning mergers and acquisitions and advisory in its Macquarie Capital division, echoing prior guidance given in July.

Macquarie’s total net operating income of rose 4 per cent to $8.2bn million in the six months ended September 30, up 4 per cent on the same period a year earlier.

The asset management and banking and financial services units made higher net profit contributions in the half, while the commodities and investment banking divisions delivered lower net profit contributions than a year earlier. Ms Wikramanayake told analysts there was lower customer activity in the second quarter in markets including global gas, power and oil.

Macquarie’s assets under management were $916.8bn in the six months ended September 30, a 3 per cent increase on a year earlier but a decline of 2 per cent from March 31. That was weighed on by foreign currency fluctuations and divestments.

Annualised return-on-equity was 9.9 per cent in Macquarie’s first half, compared with 10.8 per cent in its last full-year result.

In July at Macquarie’s annual general meeting chairman Glenn Stevens said that he aimed to improve Macquarie’s return-on-equity so that it was closer to a five-year average of 15 per cent.

Macqaurie’s group capital surplus stood at $9.8bn at September 30, down from $10.7bn at March 31.

For its last financial year ruled off on March 31, Macquarie reported a 32 per cent decline in net profit to $3.5bn, a slide on a record $5.17bn result the prior year.

Macquarie’s shares closed 0.06 per cent higher at $231.51 on Thursday and have gained 26 per cent this year.

Originally published as Macquarie Group first-half $1.6bn profit misses expectations, cautions on commodities