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Macquarie Group Ltd predicts profit growth of 10% for FY18

Macquarie Group Ltd (ASX: MQG) is Australia’s fifth largest bank, but a lot of its earnings is generated overseas.

Today, the company gave an operational update to the market.

The business has been making moves towards more defensive operations in recent years, calling them ‘annuity-style businesses’. This segment of Macquarie comprises Macquarie Asset Management, Corporate and Asset Finance and Banking and Financial Services. Macquarie said that the combined quarter net profit contribution was slightly up on the December 2016 quarter.

The other main segment to Macquarie is its capital facing businesses. This comprises Commodities and Global Markets and Macquarie Capital. Macquarie said that the quarter net profit contribution was down due to timing of income recognition.

Macquarie was pleased to report that its financial position was in good shape. It had a surplus of $4.1 billion of regulatory requirements and its CET1 ratio was 10.7%.

The good news from the update was that Macquarie expects the FY18 result to be around 10% higher than FY17. Of course, the company re-iterated that the outlook is subject to market conditions and the impact of currency movements. Today’s crash won’t help things if the market doesn’t recover by the end of Macquarie’s financial year.

Macquarie CEO, Nicholas Moore, said “Macquarie remains well positioned to deliver superior performance in the medium-term due to our deep expertise in major markets, strength in diversity and ability to adapt the portfolio mix to changing market conditions, the ongoing benefits of continued cost initiatives, a strong and conservative balance sheet and a proven risk management framework and culture”.

Foolish takeaway

I think Macquarie is the clear leader out of the big five banks, it is growing in several areas and isn’t heavily reliant on the Australian mortgage market. I’d be inclined to wait until the share market stops dropping before buying any Macquarie shares, but it looks pretty good value to me.

I also think that these top blue chips are trading at good value too.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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