Macquarie: Result 2019
Recommendation
- {{x.value}}
{{ twilioFailed ? 'SMS Code Failed to Send…' : 'Enter verification code' }}
{{ completedStep1 ? 'Authentication & Security' : content.trialHeading.replace('{0}', user.FirstName) }}
{{ content.upgradeHeading.replace('{0}', user.FirstName) }}
The email address you entered is registered with InvestSMART
Please login to continue
We have sent you an email with the details of your registration.
Looks you are already a member. Please enter your password to proceed
{{ upgradeCTAText }}
Updating information
Please wait ...
Your membership to InvestSMART Group recently failed to renew.
Please make sure your payment details are up to date to continue your membership.
Having trouble renewing?
Please contact Member Services on support@investsmart.com.au or 1300 880 160
You've recently updated your payment details.
It may take a few minutes to update your subscription details, during this time you will not be able to view locked content.
If you are still having trouble viewing content after 10 minutes, try logging out of your account and logging back in.
Still having trouble viewing content?
Please contact Member Services on support@investsmart.com.au or 1300 880 160
Please click on the ACTIVATE button to activate your Intelligent Investor 15-day free trial
Please click on the ACTIVATE button to finalise your membership
Unsuccessful registration
Registration for this event is available only to Eureka Report members. View our membership page for more information.
Registration for this event is available only to Intelligent Investor members. View our membership page for more information.
- You are already registered for this event.
- This event is already full.
- Please select a quantity for at least one ticket.
- {{ i }}
Forgotten password
Please enter your email address below to request a new password
- Indepth analysis of ASX listed shares
- BUY, Hold and Sell Recommendations
- Ideas Lab
- Special Reports
- Alan Kohler’s Weekend Briefing
- Interviews with CEO’s & top influencers
- Money Cafe and Talking Finance
- Super Advice and Q&A with Ask Alan
A common investing mistake is to extrapolate benign conditions, particularly for cyclical companies such as Macquarie Group. The iconic investment bank has belied that cyclicality by increasing earnings every year since 2012, but it looks like that run may soon come to an end, with management predicting that profits for the current financial year will be 'slightly down' on the $3.0bn chalked up for 2019.
Key Points
-
2019 was a record result but ...
-
2020 expected to be weaker
-
Long-term growth opportunities remain
The bank has certainly earned itself a breather, after a seven-year run that has seen net profit grow by a compound annual average of 22%.
In 2019, the rate of growth was 17%, with almost all of it coming from Macquarie's 'market-facing' businesses - Commodities and Global Markets and Macquarie Capital - which saw their combined pre-tax profit increase by 76% to $2.9bn. These businesses are experiencing great conditions - but they're also the main reason that profits are expected to fall this year.
Tough banking conditions
The 'annuity-style' businesses went the other way, experiencing a 4% decline in net profit to $3.3bn. The tough banking conditions in Australia were reflected in a 3% profit increase for Banking and Financial Services, despite home loan and business lending growth of 18% and 12%, respectively.
| 12 months to Match | 2019 | 2018 | /(-) (%) |
|---|---|---|---|
| Divisional PBT | |||
| MAM | 1,505 | 1,559 | (4) |
| CAF | 1,031 | 1,144 | (10) |
| Banking & FS | 756 | 737 | (4) |
| CGM | 1,505 | 910 | 65 |
| Mac. Capital | 1,339 | 721 | 86 |
| Total div. PBT | 6,136 | 5,071 | 21 |
| Corp. costs | (2,296) | (1,607) | 43 |
| Group PBT | 3,867 | 3,464 | 12 |
| Net Profit | 2,982 | 2,557 | 17 |
| Diluted EPS ($) | 8.67 | 7.58 | 14 |
| Final DPS* ($) | 3.60 | 3.20 | 13 |
| *45% franked, ex-date 13 May | |||
Macquarie Asset Management increased assets under management by 11% to $543bn, though higher costs for the divisions saw earnings fall 4% to $1.5bn. Some of these costs reflect increased investments and related acquisitions where benefits will be seen in the future.
Macquarie's weakest result was Corporate and Asset Finance where its portfolio of assets remained at $21bn, with growth in energy and transportation finance offset by realisations in the principal finance portfolio. With lower interest from principal finance and higher impairment charges, the net profit contribution fell 10%.
Investing for growth
Over many years, Macquarie has demonstrated an ability to grow in diverse markets around the world while managing risks carefully. The company continues to invest, while maintaining a sound balance sheet and a credit rating that's better than many overseas retail and investment banks. Lower earnings in the short term, shouldn't detract from these qualities.
That said, at 2.3 times book value, the stock is close to our Sell price and investors with a portfolio weighting close to our recommended limit of 7% should consider reducing their exposure. HOLD.
Recommendation
Call 1300 880 160
Start a chat
Schedule a call
