M&A and floats lift Macquarie out of doldrums
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 that the second half is typically stronger, pointing to a full‑year profit of at least $980 million. The bank also indicated profits appear on track to exceed $1 billion this year for the first time since 2010. For investors this signals improving earnings momentum, but the guidance is conditional on market conditions not deteriorating.
Macquarie shares have risen on a global lift in market confidence and signs of increased takeover activity, IPOs and stockmarket listings—trends that benefit an investment bank. The stock even hit $50 for the first time since 2010 before pulling back slightly to $49.12 after investors had hoped for more bullish commentary.
Analysts and industry managers pointed to an uptick in merger and acquisition activity, a pickup in initial public offerings (IPOs) and stronger overall sentiment toward investment banks. These factors feed deal flow and listing activity, areas where Macquarie can earn meaningful fees.
Macquarie warned that its profit will be affected by the cost of funding, greater competition in some markets, and the cost of regulatory changes. It also emphasized that its outlook depends on market conditions not deteriorating.
Despite recent improvement, Macquarie’s profits remain well below the blockbuster $1.8 billion it recorded in 2008 before the global financial crisis. Even reaching about $980 million to $1 billion would be a recovery but still short of the 2008 peak.
Yes. In response to structural changes that have squeezed returns from investment banking and stockbroking, Macquarie has invested heavily in less volatile businesses such as funds management and mortgage lending to diversify and stabilise earnings.
Macquarie reports its results for the year ending in March. The article notes the bank was approaching the halfway point in its financial year at the time of the guidance.
Market commentators described Macquarie historically as a bull‑market stock—meaning its performance tends to be leveraged to recoveries in the equity market. For everyday investors that implies Macquarie can benefit strongly when market sentiment and deal activity improve, but it also means outcomes depend on broader market conditions and the risks the bank flagged.
Call 1300 880 160
Start a chat
Schedule a call
