Markets: Macquarie's earnings efficiency

Citigroup has boosted its earnings per share forecasts for Macquarie Bank, saying it has cut expenses and is enjoying some cyclic benefits.

Shares in Macquarie Group gained as much as 4.2 per cent today. The stock, up 85 per cent in the last 12 months, continues to defy some analyst forecasts.

Craig Williams, the Citigroup analyst, has a 12-month share price target for the stock at $44. At 1545 AEST Macquarie was up $1.30, or 3 per cent, to $45.36, after rising as high as $45.92.

“Business is benefiting from higher capital markets share, despite weakness in overall market volumes,” says Williams. Australia’s biggest investment bank is “harvesting the impacts of the large expense reductions achieved through its 2013 financial year and some nuanced signals from the board to return closer to the long-established profit-sharing formula over a full cycle”.

On May 15 the stock hit a 52-week high of $47.37 and is down 3.4 per cent since then. The S&P/ASX200 Index has dropped 3.7 per cent during the same period.

Citi’s Williams has increased his earnings per share forecasts for the stock by 7 per cent in the 12 months to June 30, 2014 and by 11 per cent for the same period in 2015.

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