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Macquarie posts 2pc fall in half-year profit, reiterates flat guidance

Nicholas Grove  |  28 Oct 2016Text size  Decrease  Increase  |  

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Australia's biggest investment bank reports a 2 per cent fall in half-year net profit to $1.05 billion following a decline in advisory and performance fees.

 

Macquarie Group (ASX: MQG) on Friday announced a net profit of $1.05 billion for the half-year ended 30 September 2016, down 2 per cent on the same half in the previous year following a fall in fee and commission income.

The figure was in line with Morningstar's expectations and modestly above guidance.

Earnings per share for the first half of fiscal 2017 were down 4 per cent on the prior corresponding half to $3.12.

Operating income for the half was down 2 per cent year over year to $5.218 billion, Macquarie said in a statement to the ASX.

Operating costs stood at $3.7 billion for the half, up 1 per cent on the first half of fiscal 2016.

Annualised return on equity stood at 14.6 per cent, down from 15.8 per cent in the first half of fiscal 2016.

Macquarie said its "annuity-style" businesses' (Macquarie Asset Management, Corporate and Asset Finance, and Banking and Financial Services) combined net profit contribution fell 15 per cent.

Its capital markets-facing businesses' (Macquarie Securities Group, Macquarie Capital, and Commodities and Financial Markets) combined net profit contribution was broadly in line with the first half of fiscal 2016.

Assets under management stood at $493.1 billion as at 16 September, up 3 per cent from March 2016, Macquarie said.

The investment bank declared an interim dividend of $1.90 per share, 45 per cent franked, up 19 per cent on the first-half 2016 dividend of $1.60.

The dividend will be paid on 14 December 2016 to shareholders on record as of 9 November 2016.

Morningstar head of Australian banking research David Ellis said that despite slowing profit growth in the half, he retained his positive view on the internationally focused asset manager and investment bank.

"Longer term, Macquarie is well placed to leverage the likely surge in global infrastructure spend as it is a world leader in investing and/or managing major infrastructure and real assets," he said.

"We expect ongoing and increasing institutional client demand for attractive and sustainable income yield that major infrastructure and real assets generate.

"Despite general market challenges, we expect the firm to generate returns on equity above 14 per cent and pay an attractive dividend stream."

Macquarie Group CEO Nicholas Moore said the first half of fiscal 2017 highlighted the strength of the bank's global platform, the benefit of recent acquisitions and its ability to adapt to changing conditions.

He also reaffirmed that the bank expects its full-year 2017 result to be broadly in line with fiscal 2016.

"The group remains well positioned, with a strong and diverse global platform and deep expertise across a range of products and asset classes," Moore said.

"This is built on the foundation of a strong balance sheet, surplus capital, a robust liquidity and funding position and a conservative approach to risk management, which is embedded across all operating groups."

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Nicholas Grove is a Morningstar journalist.

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