Macquarie reports a 5% bump in interim profit to $1.31bn

  • By Elizabeth Fry

Macquarie Group has flagged a 10 per cent increase in full year earnings for 2019 after reporting a 5 per cent rise in net profit to $1.31 billion for the six months to December.

Interim earnings were lifted by a robust performance in Macquarie's commodities and markets business and a lower tax rate in the US.

The full year guidance - which means another year of record profits - is a big step up on Macquarie’s previous statement that annual earnings for 2019 would be “broadly in line” with last year’s record profit of 2.56 billion.

After 44 results presentations, this was Nicholas Moore’s last as chief executive of Australia’s biggest investment bank and Shemara Wikramanayake’s first. Wikramanayake will take over as chief executive on November 30.

First half revenue was up 8 per cent to $5.83 billion on the year ago same period while operating costs rose 12 per cent to $4.12 billion.

Profit before tax was flat at $1.70 billion.

Income from Macquarie's capital markets facing businesses - which includes commodities trading and M&A advisory - surged 95 per cent $1.10 billion.

“There has always been a bias to the second half of the year, so it is pleasing to see strong drivers coming through helped by the US energy market,” Moore said at a briefing.

On the flip side, the annuity-style businesses - containing Macquarie’s flagship asset management arm - posted a 29 per cent slump in profit to $1.49 billion. Moore attributed the fall to lower performance fees in MIRA adding that they “swung around and were somewhat irregular”.

However, the outgoing chief executive noted that while the fees were lower than the very high fees achieved a year earlier, income was still up 10 per cent on the immediately preceding year.

Solid result; broad-based growth

Commenting on the result Moore noted: “During the half-year we continued to build on the strength of our Australian franchise, while international income accounted for 67 per cent of the Group’s total income.”

"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," Wikramanayake said in a statement.

UBS analysts called this a solid result with revenue stronger across multiple lines of business.

“Results were solid in most business units, but commodities was the highlight.”

UBS pointed out that Macquarie has excludes its profit from Quadrant Energy which adds an estimated $100 million to the bottom line and represents around a 14 per cent hike in earnings year-on-year.

Macquarie's Australian mortgage portfolio increased 10 per cent over the half to $36.1 billion and delivered a 3 per cent increase in profit contribution to $296 million.

Assets under management for the world’s biggest manager of infrastructure rose 11 percent in the half to $551 billion.

Macquarie said it has put on hold its $1 billion share buyback program announced last year, saying there was “currently no prospect of buying any shares” under the program.