Macquarie profit drops 39 per cent as commodity markets stabilise

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Investment behemoth Macquarie Group has taken a hit to earnings in the first half amid calmer commodity markets and a softer performance from its flagship asset management business.

Macquarie on Friday posted a first half net profit of $1.4 billion, down 39 per cent on the same period last year, and 51 per cent lower than the six months to March.

Macquarie boss Shemara Wikramanayake said the first-half result was substantially down compared to a strong period of realisations in the prior corresponding period.Credit: Elke Meitzel

Macquarie chief executive Shemara Wikramanayake said the company’s underlying client franchises were resilient in less certain market conditions.

“Our annuity-style businesses saw growth in loan books, deposits and assets under management, but the first-half result was substantially down compared to a strong period of realisations in the prior corresponding period, with an expectation that green energy realisations will be predominately in the second half,” she said.

“Our markets-facing businesses delivered solid performances despite lower market activity and volatility levels, with growth in the commodities and global markets (CGM) client base and Macquarie Capital’s private credit book partially offsetting lower equity realisations.”

The board also approved an on-market share buyback of up to $2 billion.

It comes after the company warned of a weaker first half amid a tougher deal environment and lower investment-related income from its green energy investments in September.

Macquarie’s annualised return on equity was 8.7 per cent, down from 16.9 per cent last financial year as its assets under management increased 7 per cent over the year to $892 billion.

The company said its profits were affected by softer earnings from asset sales in its asset management business, and this weighed on profits across Macquarie’s less volatile “annuity-style” activities.

Net profit for Macquarie Asset Management (MAM) dived 71 per cent to $407 million amid a delay in asset realisations and an increase in operating expenses.

Its banking and financial services business, which includes its retail bank, delivered a net profit of $638 million, up 10 per cent from the previous corresponding period as it grew its loan portfolio and deposits and improved average margins.

The company’s market-facing activities, including Macquarie Capital and most of its CGM business, also took a blow, delivering net profit of $1.5 billion, down 32 per cent on the same period last year. Its CGM arm’s net profit dropped 31 per cent, which Macquarie said was the result of a more stabilised commodity market as volatility and price movements eased following record highs.

“The prior corresponding period featured a strong performance from commodities in CGM together with material asset realisations in Macquarie Capital,” the company said.

Macquarie said it “continued to maintain a cautious stance, with a conservative approach to capital, funding and liquidity” as it monitors global economic conditions, inflation, interest rates and geopolitical events.

The company announced an interim ordinary dividend of $2.55 a share, down from $3 last year.

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