Macquarie Group Ltd (ASX: MQG) has reported a 32% decline in net profit for the first half of 2021 compared to the previous corresponding period (pcp). Moreover, the annualised return on equity has also dropped by 9.5%, and net operating income has fallen by 13%.
However, the company also reported a 5% drop in operating expenses versus pcp. The result exceeded the asset management giant and investment bank’s guidance for its first half.
At the time of writing, early market trading has seen the Macquarie share price rise 2.61% to $135.91.
What is pressuring the Macquarie share price?
Macquarie’s reported losses in its banking and financial services, down 18% compared to pcp. Macquarie Capital was quoted as being “down significantly”.
Banking suffered predominantly due to increased credit impairment charges, as well as a COVID-19 driven deterioration in current and expected conditions. Moreover, the need to support impacted clients required higher headcount.
Within the investment banking arm, there were lower fees and commissions income due to lower mergers and acquisitions fee income. It also had impairment charges from underperforming loan facilities, and the growth of the debt portfolio. Additionally, its assets under management fell 7 per cent to $556.3bn as of September 30.
The investment bank will pay an interim dividend of $1.35 a share on December 22. This will be 40 per cent franked and is down from $2.50 a year ago. Lastly, the investment bank has declined to provide full year earnings guidance due to market uncertainty.
The Macquarie share price has had a steady rise since the market rout on 23 March,. However, it remains 3.6% lower in year to date trading.
What did management say?
Macquarie chief executive Shemara Wikramanayake displayed a cautious approach to the remainder of the year to March, 2021, saying:
Recent months have been overshadowed by the profound human impact of the COVID-19 global health crisis and its economic consequences.
Those impacts are reflected in our result, notably in credit and other impairment charges in relation to the ongoing impact of COVID-19 on our clients and customers and in delays to realising assets from our balance sheet and our funds.
When reduced guidance was announced, the Macquarie share price fell 6% in September.