In a trading update on Tuesday,Macquarie said volatile energy and commodity markets had beefed up profits for the nine months to December,offsetting the weaker earnings in the investment heavyweight’s flagship asset management arm.
Macquarie Group chief executive Shemara Wikramanayake highlighted the group’s diverse financial businesses.Michael Nagle
Macquarie,which uses a March financial year,did not disclose its actual profits for the quarter,but it said commodities and global markets business had enjoyed a bumper December quarter,prompting analysts to lift earnings forecasts for the group.
“Varied market conditions have resulted in a good quarter for the group reflecting the diversity of our activities,” chief executive Shemara Wikramanayake said in a statement.
Opal Capital portfolio manager Omkar Joshi said Macquarie was known for being highly conservative with its guidance,but the company was clearly on track for a strong financial year. “Unless the fourth quarter is very weak,it’s likely they will equal last year’s profit,if not exceed it,” Joshi said.
Morningstar analyst Nathan Zaia said he was forecasting full-year earnings would be slightly lower than last year,but he said predictions were tricky because the key source of recent strength was the commodities business – which has benefited from volatility.
Zaia pointed out commodity and energy markets had been affected by factors including the Ukraine war,severe weather and disruptions caused by COVID-19. With the energy transition under way,he said it was possible there would be further bouts of volatility that worked in Macquarie’s favour. “The environment could be favourable for Macquarie for a number of years,” Zaia said.
Investors responded favourably to the update,lifting Macquarie shares 1.5 per cent higher,to $191.82.
Macquarie said it continued to have a cautious stance,with a conservative approach to capital and funding that would allow the bank to respond to the market environment.
When asked by Jefferies analyst Brian Johnson about the group’s $12.5 billion in surplus capital,Wikramanayake said the business was keeping capital on hand in case there were potential acquisitions in areas including funds management,banking or in the commodities and global markets division.
“We have very good organic growth but it doesn’t mean we wouldn’t look at opportunities if they came up,” she said in relation to Macquarie’s banking and financial services business.
The company said its asset management division had made a “substantially” smaller profit contribution in the financial year to date,and this was mainly because it had benefited from more green asset sales in the prior year.
In contrast,Macquarie said its commodities and global markets division had posted “exceptionally strong results”,mainly because it benefited from “unusually volatile market conditions” in the gas,electricity and oil markets.
Macquarie said its banking and financial services division,which houses its domestic retail bank,had posted “continued growth”,with deposits rising 8 per cent to $125.7 billion,and mortgages rising 4 per cent to $105.4 billion.
In the investment banking unit Macquarie Capital,fee revenue was “significantly down” compared with the December quarter of 2021,as it worked on fewer deals.
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