Macquarie Group Ltd's (ASX: MQG) shares have fallen 3.8% to $53.52 after the investment bank provided an operational briefing to investors and analysts. The briefing which provided an update on business activity in the third quarter and an outlook for the full financial-year ending 31 March 2014, was far from terrible, however the market was obviously looking for more.
Key Points
- Most of Macquarie's key markets are showing improvements
- Client activity remains subdued for some capital markets facing businesses such as broking and Macquarie Capital
- Annuity-style businesses such as funds management, banking, financial services and asset financing are performing well
- Shareholders have received a distribution of Sydney Airport Holdings Ltd (ASX: SYD) securities
- The group retains a strong capital, funding and balance sheet position
Why the shares fell
CEO Nicholas Moore stated that the annuity-style businesses produced a result in the third quarter above the previous corresponding period (pcp), however he also noted that the capital markets facing businesses have experienced mixed trading with their third-quarter profit down on the pcp. His outlook for the full year remained that he expected an improved result on financial year 2013.
Investors appeared to be looking for a more upbeat tone from management on the performance of the capital markets facing businesses and a rosier outlook for profit growth year-on-year.
Still outperforming
The negative market reaction to Macquarie's update was in stark contrast to the release of Australia and New Zealand Banking Group's (ASX: ANZ) first-quarter trading results. The ANZ reported a 13% rise in cash profit to $1.7 billion and positive guidance for the full year – its shares rallied 2.2% in response.
Despite this near term move, Macquarie has certainly been the better investment over the past 12 months, with the stock up 31.8% compared with the ANZ which has gained just 8.7%. While the other three major banks have outperformed ANZ – led by the Commonwealth Bank of Australia (ASX: CBA), with a 17.1% return – the 'Big 4' are all trailing Macquarie.
Foolish takeaway
During the December quarter funds under management increased by $50 billion. Although around half of this was due to an acquisition it still highlights the significant leverage Macquarie has to improving financial markets. Relative to its international peers, Macquarie's price-to-earnings multiple looks appealing and arguably its growth options are greater.