Macquarie’s (ASX: MQG) third-quarter trading update points to growth across all segments for the nine months to Dec. 31, 2025. A culmination of higher performance fees in asset management, a growing home loan book, profit from asset sales, and more demand for commodities risk management.

Why it matters: Following a soft first-half result, it is encouraging to see earnings from asset management and capital markets increase, driven by asset sales. And while volatile, commodities and global markets benefited from whipsawing prices, something the transition to renewables could exacerbate.

  • Our fiscal 2026 profit forecast is increased 4% to $4.3 billion, largely on an upward revision to earnings from asset sales and commodity risk management. Our medium-term forecasts are largely unchanged, assuming a return to profit growth as current investments are developed and sold.
  • A change to the short-term outlook is an upgrade to commodities-related income, now forecast to increase from last year rather than remain flat. Home loan growth remains a standout at 7% in the quarter, over three times faster than the market. But, margin pressure is weighing on earnings growth.

The bottom line: Shares are at a modest premium to our unchanged fair value estimate of $205. Narrow-moat Macquarie trades on a forward P/E of 19 times and a dividend yield of 3.5%.

  • Macquarie is invested in a large and diverse pool of assets, and, coupled with its strong track record, we expect it to make decent returns on investments over time. Market conditions affect the timing and size of returns in any given year; we assume ROE averages 12.5% over the five-year period to fiscal 2030.
  • This is modestly below the 13.5% of the last five years, which included exceptionally strong earnings from commodities and global markets. Extreme weather, supply shocks, or wars that drive a material increase in demand for risk management products would be upside to our forecasts.

Macquarie Group’s diversity helps smooth earnings from lumpy and cyclical divisions

Macquarie Group is a global asset manager which spent decades branching out from its Australian investment banking roots. Asset management provides more recurring revenue streams compared with transactional based investment banking, but still carries volatility as base management fees are tied to underlying asset values--primarily fixed income, equities, and infrastructure assets.

Macquarie Asset Management is global asset manager with over $700 billion of assets under management, which dropped $250 billion after the sale of North American and European public investments to Nomura in December 2025. Specialist capabilities in infrastructure and property management set Macquarie apart from most peers and has been a key source of growth. With established capabilities and investment records, the large asset managers in the space continue to garner the bulk of inflows into the category. The United States is expected to spend trillions on infrastructure over the next decade, addressing ageing transportation, electricity, schools, and airports.

Macquarie retains a targeted approach across its investment banking business, not actively seeking to take global players head on. In the Americas and EMEA, Macquarie holds less than 2% share. Macquarie continues to leverage its global expertise and reputation in infrastructure and energy to focus on deals in these markets, with success in the smaller end of the market sometimes underserviced by larger investment banks. It is also more active in advising the private equity space.

The banking and financial services division includes a retail bank (around 7% of Australian home loans) and wealth platform. We expect Macquarie’s strategy to invest in technology to improve both the customer experience and the banks’ credit approval processes will continue to deliver above-market loan growth.

Bulls say

  • Macquarie’s position as one of the largest infrastructure asset manager globally leaves the firm well placed to benefit from underlying demand for assets and investors searching for maintainable income streams.
  • The expansion into funds management has produced more maintainable, less capital intensive, annuity-style income, which will prevent a GFC-like shock to earnings and return on equity.
  • A focus on niche segments of investment banking allows Macquarie to continue to increase earnings globally.

Bears say

  • Without the support of cash rate cuts close to zero it is unlikely Macquarie can continue to achieve as high returns in infrastructure, resulting in lower performance fee income.
  • Macquarie invests directly in unlisted assets and businesses, and despite being diversified, a large bankruptcy or asset write-down would still have an impact on group profits.
  • A large investment portfolio makes it more difficult for investors to track and identify issues early.

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