The Macquarie Group Ltd (ASX: MQG) share price will be on watch on Tuesday after the global diversified financial group released a presentation and outlook update ahead of presenting at the CLSA Investors' Forum in Hong Kong.
According to the release, Macquarie has had a positive start to FY 2019 with all operating groups performing in line with expectations. This has led to its operating group contribution rising compared to the prior corresponding period but declining slightly on the strong fourth quarter of FY 2018.
Macquarie's annuity-style businesses have continued to perform well thanks partly to continued strong base and performance fees in MAM.
This has offset a softer performance from its CAF Principal Finance business which is down due to the timing of transactions and a reduction in the size of the portfolio. The company's CAF Asset Finance business is broadly in line with the prior corresponding period.
Another positive has been the continued growth in mortgages, business banking, and platforms in BFS. Management advised that deposits are broadly in line with the prior corresponding period.
Macquarie's capital markets facing businesses have also performed well so far in FY 2019. They have experienced strong trading conditions across most markets, but particularly in commodity markets and fixed income products.
Elsewhere, the MacCap balance sheet positions are performing in line with expectations, though fee revenue from DCM is down on a strong corresponding period.
Outlook.
Despite the solid start to year, management has held firm with its full year guidance for a result in line with the one it delivered in FY 2018.
This guidance does remain subject to market conditions, currency fluctuations, regulatory changes, geographic composition of income, and transaction completion rates. In respect to the latter, it is worth noting that the sale of the Quadrant Energy business to Santos Ltd (ASX: STO) has not been included in its outlook.
Should you invest?
While the guidance for FY 2019 is not the strongest, I feel Macquarie is still one of the best options in the financial sector due to being well positioned to deliver a superior performance in the medium-term.
This could make it a great alternative to bank shares such as Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB).
