The Macquarie Group Ltd (ASX: MQG) share price is under consideration after revealing a result.
It recently reported its FY23 half-year result to the market. Results give investors a real insight into how the business is performing and what it's expecting to happen next.
The investment bank is one of the largest businesses in Australia with a market capitalisation of $64 billion according to the ASX.
First, we'll have a quick review of how the business performed for the six months to September 2022.
HY23 earnings recap
Macquarie reported that its first-half net profit after tax (NPAT) was $2.3 billion, which was an increase of 13% on the first half of FY22 and down 13% on the second half of FY22.
International income made up 72% of the total income in the half.
Assets under management were A$795.6 billion at 30 September 2022. This was an increase of 3% from 31 March 2022 and up 8% from 30 September 2021.
Macquarie boasted that its financial position comfortably exceeded regulatory minimum requirements, with a group capital surplus of A$12.2 billion. The bank common equity tier 1 (CET1) ratio was 12.8%.
It achieved an annualised return on equity (ROE) of 15.6%, which compared to 18.7% in FY22.
The board decided to declare an ordinary dividend of A$3 per share, representing a dividend payout ratio of 50%.
Is the Macquarie share price an opportunity?
According to reporting by The Australian, JP Morgan analyst Andrew Triggs said that the FY23 half-year result "again demonstrated the strength and breadth of Macquarie's diversified franchise."
Triggs pointed out that the global investment bank's profit was around 4% higher than what the consensus of analysts were expecting.
Macquarie also said that stronger earnings from its stronger commodities and global markets business, as well as investment income, more than offset the lower earnings contribution from lower fees and commission income. It also offset the higher compensation and higher tax rate. There were "swings and roundabouts" on the divisional outlook.
Expectations for FY23 profit of around $4.2 billion shouldn't change "too much" according to the analyst.
The broker Citi currently has a neutral rating on Macquarie after an initial look at the company's financial result. It noted that areas like commodities managed to offset other parts of the business that aren't doing as well.
Citi's estimates put the current Macquarie share price at 14 times FY23's estimated earnings and 16 times FY24's estimated earnings.
My take on the opportunity
While earnings may be headed lower in the next year or two, I think Macquarie is a very good business. It is regularly investing for growth, including in future-focused areas like green energy. I think that it's one of Australia's truly global success stories.
I like that Macquarie has a dividend payout ratio of around 50%. That rewards shareholders with a solid payout, but it also means there's plenty of cash to invest in more opportunities in the business.
Speaking of the dividend, Citi thinks that Macquarie will pay a dividend yield of 3.6%, excluding the effect of franking credits.
I think it'd be even better value if the Macquarie share price was around, or under, $150.
