The Macquarie Group Ltd (ASX: MQG) share price is having a day to forget.
In afternoon trade, the investment bank's shares are down 8% to $186.42.
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Why is the Macquarie share price tumbling lower?
Investors have been selling down the Macquarie share price today after the bank's strong second-half growth wasn't quite as strong as many in the market were expecting.
In case you missed it, this morning the company reported a 36% increase in full year operating income to $17,324 million and a 56% jump in net profit to $4,706 million. The latter comprises first-half profit of $2,043 million and second-half profit of $2,663 million.
While Macquarie revealed growth across all its businesses, the Macquarie Capital business was the standout with a 269% increase in its net profit contribution of $2,400 million. A net profit contribution represents management accounting profit before unallocated corporate costs, profit share and income tax.
This was supported by its Commodities and Global Markets (CGM) and Banking and Financial Services (BFS) businesses. Their net profit contributions increased 50% to $3,911 million and 30% to $1,001 million, respectively. Finally, the Macquarie Asset Management (MAM) business reported a 4% increase in its net profit contribution to $2,150 million.
Why wasn't this good enough?
According to a note out of Goldman Sachs, Macquarie's revenue and profit were both short of its expectations. It commented:
MQG's FY22 NPAT was up +56% on pcp to A$4,706 mn and -2% below GSe but +4% above VA consensus. The miss to our estimates was revenue driven (-3.8% lower than GSe), driven primarily by a still strong trading result (+15% on pcp), but somewhat lower than we had forecast, a higher tax rate (2H22 26% vs. GSe 23%), partially offset outperformance on expenses (-6% lower than GSe).
One positive, though, is that it feels that Macquarie's outlook commentary suggests that it is positioned to meet expectations in FY 2023.
As appears to now be normal practice, Macquarie has not provided any short-term outlook for the entire Group for FY22, noting a number of influences which might impact the outlook and highlighting that they are maintaining a conservative stance to capital, funding and liquidity. However, MQG has provided some high level guidance on the divisional performance.
While there are some "ups and downs", particularly in CGM, there is nothing in the guidance that we expect will drive material divergence to our current FY23E NPAT forecast of A$4,133 mn (Visible Alpha consensus A$4,169 bn).
