The Macquarie Group Ltd (ASX: MQG) share price will be one to watch on Friday.
This follows the release of the investment bank's half-year results this morning.
Macquarie share price on watch after earnings beat
- Net operating income up 11% over the prior corresponding period to $8,641 million
- Total operating expenses up 11% to $5,613 million
- Profit after tax up 13% to $2,305 million
- Interim dividend up 10% to $3.00 per share
What happened during the half?
For the six months ended 30 September, Macquarie reported an 11% increase in net operating income to $8,641 million and a 13% increase in profit after tax to $2,305 million.
One of the key drivers of this growth was the Commodities and Global Markets (CGM) business, which delivered a 15% increase in profit contribution to $1,996 million. This reflects a strong risk management contribution across the platform, particularly from the Gas and Power, Resources and Global Oil businesses, due to increased client hedging activity.
Also performing strongly was the Macquarie Asset Management (MAM) business, which delivered a 28% increase in profit contribution to $1,402 million. This was driven by investment-related income, primarily due to the timing of asset realisations in the green energy sector.
Another highlight was the Banking and Financial Services (BFS) business, which reported a 20% increase in profit contribution to $580 million. This reflects growth in the loan portfolio and total BFS deposits, improved margins, and lower credit impairment charges.
One disappointment was the performance of the Macquarie Capital business, which posted a 12% decline in its profit contribution to $595 million. Management notes that fee and commission income was down on a strong prior corresponding period reflecting weakening market conditions, with operating expenses also higher than the prior corresponding period.
How does this compare to expectations?
The good news for the Macquarie share price today is that this result appears to have beaten the market's expectations.
According to a note out of Goldman Sachs, its analysts were expecting Macquarie to report a profit of $2,183 million and the market consensus estimate was $2,157 million.
Management commentary
Macquarie's managing director and CEO, Shemara Wikramanayake, said:
Macquarie's businesses continued to perform well against a backdrop of more challenging market conditions, reflecting the diversity of our activities and ongoing focus on prudent risk management. We continue to adapt to meet our clients' needs.
Looking ahead, Wikramanayake remains positive on the company's medium term outlook. She 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; ongoing technology spend across the Group; a strong and conservative balance sheet; and a proven risk management framework and culture.
