The Macquarie Group Ltd (ASX: MQG) share price is falling on Friday.
In morning trade, the investment bank's shares are down 2% to $157.00.
This follows the release of Macquarie's half-year results.
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Macquarie share price falls on half-year results
Here's a summary of how the company performed compared to the prior corresponding period:
- Net operating income down 8% to $7,910 million
- Net profit down 39% to $1,415 million
- Interim dividend of $2.55 per share (40% franked)
- Assets under management up 7% to $892 billion
- Group capital surplus of $10.5 billion
- $2 billion on-market buyback
What happened during the half?
For the six months ended 30 September, Macquarie reported an 8% decline in net operating income to $7,910 million. This was driven by lower net other operating income, which was partially offset by credit and other impairment reversals, higher fee and commission income, and lower share of net losses from associates and joint ventures.
Also heading in the wrong direction were the bank's total operating expenses, which came in 6% higher year on year at $5,919 million. This was due to increases across all expense categories.
On the bottom line, Macquarie's net profit fell by a sizeable 39% over the prior corresponding period and by 51% on the second half of FY 2023. This reflects profit declines from all but one of the bank's segments.
The worst performer was the Macquarie Asset Management (MAM) business. Its net profit contribution of $407 million was down 71% due to the timing of asset realisations in green investments, and an increase in operating expenses.
The Commodities and Global Markets (CGM) business also had a tough half. It delivered a net profit contribution of $1,383 million, which was down 31%. Management advised that this reflects a decreased contribution from Commodities risk management.
The Macquarie Capital business reported a 28% decline in net profit contribution to $430 million. This was driven by lower investment-related income due to the non-recurrence of material asset realisations.
Finally, the Banking and Financial Services (BFS) business was the standout performer with a 10% increase in its net profit contribution to $638 million. This was driven by growth in the loan portfolio and BFS deposits, together with improved average margins.
How does this compare to expectations?
As you might have guessed from the Macquarie share price performance, this was short of the market's expectations.
Goldman Sachs was expecting a cash net profit after tax of $1,632 million and the consensus estimate was $1,774 million.
A higher-than-expected dividend and the announcement of a $2 billion buyback appear to have been a pleasant surprise, though.
Management commentary
Macquarie's managing director and CEO, Shemara Wikramanayake, was pleased with the company's performance in a difficult environment. She said:
Macquarie's underlying client franchises were resilient in less certain market conditions. Our annuity-style businesses saw growth in loan books, deposits and assets under management, but the first-half result was substantially down compared to a strong period of realisations in the prior corresponding period, with an expectation that green energy realisations will be predominately in the second half. Our markets-facing businesses delivered solid performances despite lower market activity and volatility levels, with growth in the CGM client base and Macquarie Capital's private credit book partially offsetting lower equity realisations.
Outlook
Ms Wikramanayake appears cautiously optimistic on the bank's outlook. She said:
Macquarie remains well-positioned to deliver superior performance in the medium term with its diverse business mix across annuity-style and markets-facing businesses; deep expertise across diverse sectors in major markets with structural growth tailwinds; patient adjacent growth across new products and new markets; ongoing technology and regulatory spend to support the Group; a strong and conservative balance sheet; and a proven risk management framework and culture.
The Macquarie share price is down 6% over the last 12 months.
