Macquarie Group Ltd (ASX: MQG) recently reported that it faces a number of headwinds which are likely to see its 2017 financial year result be roughly in line with the 2016 financial results (FY16).
The financial services giant reported operating income of over $10 billion in FY16 and a profit after tax of more than $2 billion – up 29% over the previous year.
The company has 6 major divisions, as detailed below.
And here’s how those divisions generate pre-tax profits (excluding tax, corporate costs and profit sharing)
As you can see from this chart, Macquarie generates much of its revenue from divisions that generate annuity-style income. Those divisions include Asset Management, Corporate Asset Finance and Banking and Financial Services – generating more than 70% of revenues.
In simple terms, it means Macquarie is less affected by market movements, economic cycles and other adverse external events than many other financial services providers such as Australia’s big four banks.
Given the attractiveness of Macquarie’s model, at the current share price of $74.60, shares appear reasonably priced.
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