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Macquarie profit surges

Investment bank Macquarie Group (ASX: MQG) has reported a 17% jump in net profit to $851 million for the 2013 financial year, driven by strong second half results.

Net profit for the six months to end of March rose 36% over the previous corresponding period to $490 million, as equities markets staged a recovery.

A reduction in operating expenses, down 10% to $5.3 billion also helped, with the investment bank cutting staff and bonuses. No longer just driven by earnings in Australia, 63% of total income now comes from offshore, while assets under management rose from $327 billion to $347 billion at the end of March.

Macquarie chief executive Nicholas Moore said, “Global market conditions generally improved during the year to 31 March 2013 which, together with strong cost control across the group, led to the improved result. The group remains well positioned, with a strong and diverse platform and specialist skills across a range of products and asset classes.”

The company declared a final dividend, franked to 40% of $1.25, taking the total dividend for the year to $2.00, a significant improvement on 2012’s $1.40. Macquarie pointed to an even better result in the year ahead, subject to market conditions.

In the past six months, Macquarie’s shares have rocketed up over 40%, including more than 10% in morning trading today. By comparison the S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) has risen 15.4%. The investment bank has even outperformed the big banks, which have been on a tear, with Commonwealth Bank (ASX: CBA) up 29% and Westpac Banking Corporation (ASX: WBC) up 36%.

Foolish takeaway

Like all investment banks, Macquarie is heavily dependent on market activity. The bank suffered in the years following the GFC, but appears to be back on track. Return on equity, once consistently above 20% prior to the GFC, is slowly rising and looks set to hit double figures in the not-too-distant future. Macquarie could be one to watch.

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