Macquarie (ASX:MQG) doubles half year profit and launches $1.5bn capital raising

Macquarie had a strong half…

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The Macquarie Group Ltd (ASX: MQG) share price will be one to watch when it returns from its trading halt.

This follows the release of the investment bank’s half year results this morning.

Macquarie share price on watch after doubling profits

  • First half net profit up 107% to $2,043 million
  • International income now represents 72% of total income
  • Assets under management up 31% during the six months to $737 billion
  • CET1 level 2 ratio of 11.7%
  • Capital surplus of $8.4 billion
  • Partially franked interim dividend of $2.72 per share
  • $1.5 billion capital raising announced

What happened during the half?

All eyes will be on the Macquarie share price next week after the investment bank reported a first half net profit of $2,043 million. This was double what it recorded in the prior corresponding period and in line with the second half of FY 2021.

A key driver of this growth was the Macquarie Capital business which delivered a net profit contribution of $468 million. This was up significantly from a loss of $189 million in the first half of FY 2021. Management advised that this reflects higher fee and commission income which was driven by mergers and acquisitions and debt capital markets income.

Supporting this growth was the Macquarie Asset Management (MAM) business, which delivered a net profit contribution of $1,305 million. Management advised that this was up 23% and driven largely by income related to the disposition of Macquarie Infrastructure Corporation assets. This was offset partially by lower performance fees.

The Banking and Financial Services (BFS) business delivered a net profit contribution of $482 million for the half, up 52% on the prior corresponding period. This reflects strong home loan, business lending, platforms and deposits growth and lower credit impairment charges. Partially offsetting this was an increased headcount and investment in technology to support growth.

The Commodities and Global Markets (CGM) business was a strong performer during the half. CGM delivered a net profit contribution of $1,729 million, up 60% on the prior corresponding period. This was driven by increased revenue across Commodities, with strong risk management income from Gas and Power, Resources, and Agriculture. The result also benefited from the partial sale of the UK meters portfolio of assets in May.

Macquarie’s Managing Director and Chief Executive Officer, Shemara Wikramanayake, said: “This first half saw a significant increase in net profit contribution from all four operating groups compared with 1H21, a period which was affected by the COVID-19 pandemic. Today’s result is consistent with a strong 2H21 and reflects improved trading conditions across our diverse platform.”

Capital raising

The reason the Macquarie share price is in a trading halt today is that it is undertaking a non-underwritten institutional placement aiming to raise approximately $1.5 billion. These funds will be raised via a bookbuild process commencing at $190.00 per share. This represents a 4% discount to the Macquarie share price at Thursday’s close.

A share purchase plan will follow, giving shareholders the opportunity to apply for up to $30,000 of shares. This will be offered at the lower of the placement price (adjusted for the interim dividend) or a 2% volume weighted average price during the five days prior to the closing date of the share purchase plan.

Ms Wikramanayake commented: “Having deployed $5.5 billion of capital over 2H21 and 1H22, we continue to see a strong pipeline of opportunities. Raising new capital provides us with additional flexibility to invest in new opportunities where the expected risk-adjusted returns are attractive to our shareholders, while maintaining an appropriate capital surplus.”

Outlook

Macquarie appears cautiously optimistic on the future but provided no guidance for the remainder of FY 2022.

Ms Wikramanayake said: “Macquarie remains well-positioned to deliver superior performance in the medium term. This is due to our deep expertise in major markets; strength in business and geographic diversity and ability to adapt the portfolio mix to changing market conditions; an ongoing program to identify cost saving initiatives and efficiency; a strong and conservative balance sheet; and a proven risk management framework and culture.”

The Macquarie share price is expected to return to trade on Tuesday at the latest.

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