Macquarie Group

Macquarie Group’s share price increased 4% following its interim result (it has a 31 March year end) despite a further fall in revenue. Operating income fell 5% to $3.1bn from a year earlier, but net profit increased 18% to $361m as staff cuts led to a 9% fall in operating expenses to $2.6bn. Earnings per share also increased 22% to $1.06 due to the fall in the number of shares on issue. The company is half way through a $500m share buyback and further shares have been repurchased to offset the issue of employee options. The interim dividend was increased from 65 to 75 cents (unfranked, ex date 2 Nov).

The results from the various business divisions were as expected, with the three market facing businesses producing a measly combined profit of $165m. The equities division lost $64m and the capital markets division eked out a $10m profit. This lousy performance and the company’s large capital buffer is why return on equity remains at a paltry 6.6% and further staff cuts are needed.    

The share price has increased 6% since 10 Oct 12 (Hold – $29.17) and we’re sticking with HOLD.

Note: The model Growth portfolio owns Macquarie Group shares.