Macquarie Group Reports fall in profits of 8 per cent
Macquarie Group (ASX:MQG) has reported an 8 per cent fall in profits in the FY20 financial year at $2.731 billion arising predominantly from market-facing activities. This result reflects 51 years of unbroken profitability for Australia’s largest Investment bank.
Macquarie Group is headquartered in Australia but conducts 67 per cent of its activities outside the country, and its operating groups are split into two divisions, Macquarie Asset Management and Macquarie Capital. The Company’s primary activities include retail banking, Wealth Management, Leasing and Asset Financing, trading, Investment Banking, and principal investment.
The media release to the ASX on July 30 2020, described how the general economic conditions prescribed by COVID-19 were the predominant cause in falling profits. Macquarie’s Asset Management Wing was also down 5 per cent at June 30 from March 31 predominantly driven by movements in foreign exchange prices. The report described how this was “partially offset by market appreciation.”
Currently, the Group has $568 billion under management. The Group in the financial quarter also strengthened its capital structure in the fourth quarter of 2021. Capital reserves are currently at $8.1 billion up from $7.1 billion on June 30 2020.
Macquarie Group’s annual meeting follows accusations in the United States that the Investment Bank, attempted extortion, and sabotage by acquiring an Energy Financial Provider. US courts claim that Macquarie pushed Big Apple Energy and Clear Choice Energy into bankruptcy to take control of its business and cover-up mistakes of a senior Macquarie Banker. Macquarie is being sued for $120 million.
Looking ahead Macquarie Group’s Chairman, Peter Warne, flagged that the ‘effects of COVID-19 pandemic have and will continue to be felt for some time. He described how Macquarie’s financial position has them well placed to deal with the impacts of the crisis, and the biggest challenged they faced was assisting clients with their diverse range of needs. Ninety-eight per cent of the Groups employees are currently working from home, and it is expected that they will continue to do so for some time.
Macquarie Group closed trading at $124.98 on July 29 2020, hovering around 2019 levels. At the height of the pandemic, the Australian banking sector was hit significantly and Macquarie Group lost over half of its value falling to $69 per share from $152. Currently, it has recovered 80 per cent of its value.
Morgan Stanley, Morgan’s, and Ord Minnett have overweight, add and buy recommendations respectively, on Macquarie, though the Australian Investment Bank is currently sitting at their average target price at $125. The basis for these positions is on that The Group is one of Australia’s most reliable banks and US Investment Bank reporting season was strong. Macquarie Group did not release earnings guidance for FY2021 due to the uncertainty of global conditions.