How did the Macquarie Group Ltd (ASX: MQG) share price perform in September 2021?
Macquarie shares actually went up by around 9%. This is in contrast to the performance of the S&P/ASX 200 Index (ASX: XJO) which fell by 2.7%. So, Macquarie outperformed the ASX index by more than 10% last month.
On 8 September 2021, the global investment bank announced a trading update.
Macquarie’s FY22 first half update
As part of an investor presentation, it gave an update about its short-term outlook.
The company said that it expects the first half of FY22 result is going to be slightly down on the second half of FY21.
However, this would actually represent an increase on the prior corresponding period of the first half of FY21.
Regarding the first quarter of FY22, it said that the operating profit contribution was “significantly” up on the prior corresponding period, which had mixed trading conditions.
There are four segments to the Macquarie business. It has ‘annuity-style’ businesses, being Macquarie Asset Management (MAM) and the banking and financial services (BFS). The other two divisions are described as its market-facing businesses of commodities and global markets (CGM) and Macquarie Capital.
In the first quarter of FY22, it said that the annuity-style businesses’ combined net profit contribution was slightly higher on the prior corresponding period due to higher average volumes and lower provisions in BFS. However, this was partially offset by a reduced contribution from MAM because it made a gain on the sale of the rail operating lease business in the prior period, which won’t be repeated this year.
Turning to the market-facing businesses, the combined quarterly net profit contribution was up “significantly” year on year because of the sale of the UK commercial and industrial smart meter portfolio as well as “significantly” higher investment-related income in Macquarie Capital.
Profit and expectations can have an important impact on the Macquarie share price over time.
Outlook for the business
Macquarie’s Green Investment Group is one of the leading renewable energy developers and investors in the world. The investment bank sees this division as an important part of its future. It has more than $2 billion of current commitments, with more than $45 billion of committed and arranged to support green energy projects. It has more than 30GW in global development and the construction pipeline.
In terms of the medium-term outlook, Macquarie says that it remains well positioned to deliver “superior performance”, with deep expertise in major markets.
It wants to build on its strength in business and geographic diversity and continue to adapt its portfolio mix to changing market conditions.
The global investment bank says that its MAM and BFS businesses are delivering superior returns after years of investment and acquisitions.
Macquarie’s market-facing businesses are well positioned to benefit from improvements in market conditions, with “strong” platforms and franchise positions.
The overall business has an ongoing program to identify cost saving initiatives and efficiency, whilst operating with a strong and conservative balance sheet. Management believe the bank has a well matched funding profile with minimal reliance on short-term wholesale funding. Surplus funding and capital is available to support growth.
Is the Macquarie share price a buy?
The broker Citi doesn’t think so, calling it a sell on valuation grounds, with a price target of $153.
However, Credit Suisse is neutral on the business, with a price target of $175.