Macquarie quizzed on dividends
Despite Friday's share price surge of nearly 10 per cent, analysts are cautioning the result does not mean boom times have returned for the country's biggest investment bank.
Joining Westpac and ANZ Bank in returning capital to shareholders, Macquarie has unveiled a forecast-busting final dividend of $1.25, underpinned by a 17 per cent jump in full-year profits.
Its shares surged above $43, their highest level since mid 2010, as investors welcomed the profit growth and dividend surprise. But the share price is well off the $90-plus levels reached in the heady days before the financial crisis.
It's also worth remembering the high dividend may be an admission that the board sees relatively few growth options in which to invest.
Analysts quizzed chief executive Nicholas Moore on whether the high payout ratio of nearly 80 per cent of earnings was a sign Macquarie could not find good assets to acquire.
UBS analyst Jonathan Mott described the payout ratio of 60 to 80 per cent as "remarkably high" for an investment bank, and asked if this signalled growth opportunities were not as strong as thought.
Moore made it clear Macquarie thought it had surplus capital, and it was becoming "harder and harder" to make transformative acquisitions, such as its purchase of Delaware Funds Management.
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Macquarie unveiled a forecast‑busting final dividend of $1.25, which matters because it signals strong near‑term cash returns to shareholders and follows a 17% jump in full‑year profits that surprised the market.
Macquarie's shares jumped nearly 10% after the profit growth and dividend surprise, pushing the stock above $43 — its highest level since mid‑2010 — as investors welcomed the stronger results and capital return.
Not yet — while shares rose above $43, the stock remains well below the $90‑plus levels it reached before the financial crisis, so analysts caution that the results don't necessarily mark a full return to those heady times.
Macquarie's payout ratio was described as nearly 80% of earnings, which is important because a very high payout can mean the bank is returning most profits to shareholders rather than reinvesting in growth opportunities — a point analysts have questioned.
Analysts, including UBS's Jonathan Mott, called a 60–80% payout ratio 'remarkably high' for an investment bank and asked whether the level suggested fewer attractive growth opportunities for Macquarie.
Nicholas Moore said Macquarie believes it has surplus capital and that it's becoming 'harder and harder' to make transformative acquisitions, referencing past deals such as the purchase of Delaware Funds Management.
The article notes that a high dividend may be interpreted as the board seeing relatively few growth options to invest in — analysts raised this possibility when questioning management — though the company frames it as surplus capital being returned to shareholders.
Macquarie joined peers like Westpac and ANZ in returning capital to shareholders, highlighting a broader trend among big Australian banks to boost dividends and capital returns after improved profit performance.
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