Macquarie out of doldrums on merger rebound
After a sharp rally in its share price in recent months, on Tuesday Macquarie said first-half profit was about $490 million, and noted that the second half had historically been the stronger of the two, pointing to a full-year profit of at least $980 million.
Such a result would constitute profit growth of about 15 per cent, but many analysts are banking on growth of more than 25 per cent over the year to March.
While earnings are still well below the peak hit before the global financial crisis, investors are taking an increasingly upbeat view on the stock amid signs of increased takeover activity and stockmarket listings.
The managing director of White Funds Management, Angus Gluskie, highlighted recent signs of a global lift in merger and acquisition activity and initial public offerings - trends that are beneficial to Macquarie.
"I think the specifics in the numbers for this half are less important in people's minds than the fact that in the last couple of months we've seen an uptick in the fundamental drivers of Macquarie's business," Mr Gluskie said.
The head of Australian banking research at Morningstar, David Ellis, said there had been a global improvement in sentiment towards investment banks.
"Macquarie has historically been a bull market stock. So, if you believe the equity market is going to move ahead, Macquarie is leveraged to a recovery in the market," Mr Ellis said.
Reflecting the improving outlook, Macquarie shares have risen strongly recently, last week hitting $50 for the first time since 2010. On Monday the stock fell 1.8 per cent to $49.12, as some had expected more bullish commentary from the bank.
Macquarie released the profit guidance in a presentation by executives at the CLSA Investors' Forum in Hong Kong. As always, it said its outlook was subject to market conditions not deteriorating.
Macquarie reports its results over the year to the end of March, so it is approaching the halfway point in its financial year.
It also said the profit would be affected by the cost of funding, greater competition in some markets, and the cost of regulatory changes.
Despite the signs of improvement for Macquarie, its profit is still well below the blockbuster earnings of $1.8 billion that were reached in 2008 before the peak of the global financial crisis.
In response to deep-seated changes in finance that have squeezed profits in investment banking and stockbroking, the bank has in recent years invested heavily in less volatile businesses such as funds management and mortgage lending.
Frequently Asked Questions about this Article…
Macquarie said first‑half profit was about $490 million and noted the second half is historically stronger, pointing to a full‑year profit of at least $980 million. The article also says Macquarie appears on track to exceed $1 billion this year for the first time since 2010, but reaching that level depends on market conditions and analyst expectations.
Shares have risen as investors reacted to signs of improving markets and increased takeover and listing activity. The stock recently hit $50 for the first time since 2010, then dipped 1.8% to $49.12 after some investors had expected more bullish commentary from the bank.
According to fund managers quoted in the article, a global uptick in merger and acquisition activity and initial public offerings is boosting the fundamental drivers of Macquarie’s business, helping investment banking and advisory revenue and improving sentiment toward the bank.
Macquarie said profits could be affected by the cost of funding, greater competition in some markets, and the cost of regulatory changes — and its outlook is conditional on market conditions not deteriorating.
Macquarie reports results for the year ending in late March. That matters because the company was approaching the halfway point in its financial year when it gave guidance, and seasonality (a stronger second half historically) can influence full‑year results.
Despite recent improvement, Macquarie’s profit remains well below the blockbuster earnings of $1.8 billion it recorded in 2008 before the global financial crisis.
Yes. The article notes Macquarie has invested heavily in less volatile businesses in recent years — notably funds management and mortgage lending — to smooth earnings after structural changes that squeezed investment banking and stockbroking profits.
The guidance was delivered by Macquarie executives at the CLSA Investors' Forum in Hong Kong. They emphasised the outlook is subject to market conditions and could be impacted by funding costs, competition and regulatory change.
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