Macquarie Group Well-Positioned to Achieve Goals

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Macquarie Group Well-Positioned to Achieve its Goals

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  • Top 10 ASX company, with an unbroken 52-year record of profitability
  • $3015 million after tax profit for year to 31 March 2021, an increase of more than 10 percent
  • Operating cash flow was $2826 million, $4.70 annual dividend, 40 percent franked

The business at a glance

Macquarie Group (’MBL‘ or ‘Macquarie‘)) is a global business that provides banking, investment advisory and funds management services to institutional, corporate and retail clients and counterparties around the world.   Its key business segments are:

  • Macquarie Asset Management – 34 percent of income
  • Banking and Financial Services - 13 percent of income
  • Macquarie Capital - 11 percent of income
  • Commodities and Global Markets – 42 percent of income

The bank is a global leader in risk mastery with an unbroken 52-year record of profitability. MBL is prudentially supervised by the Australian Prudential Regulation Authority and is an Authorised Deposit-taking Institution, like other Australian banks. It is a top 10 ASX company, employs 16,459 people and has $563.5 billion assets under management.

Result for year ended 31 March 2021

MBL earned $3015 million after tax, an increase of more than 10 percent on the previous financial year. The bank considers that annuity-style activities account for 54 percent of income, principally from Macquarie Asset Management, Banking and Financial Services and parts of Commodities and Global markets. This explains why MBL consistently delivers on its earnings guidance and enjoys a premium rating from investors in terms of its earnings multiple. Operating cash flow was $2826 million.

Earnings per share of $8.43 is up 7 percent on the prior year. Dividends of $4.70 per share, 40 percent franked, were paid to shareholders for the year. The final dividend was $3.35 per share, also 40 percent franked. The 40 percent franking level is explained by the fact that only 32 percent of total income is derived from Australia. The remaining income is sourced from Americas (34 percent), Europe and the Middle East (23 percent) and Asia (11 percent).

Macquarie adopts a cautious approach to capital, funding and liquidity. It maintains a strong and conservative balance sheet, relies on a diversified funding mix and retains a liquidity level ahead of its ordinary business requirements. Its funding sources include customer deposits (48 percent), bonds (19 percent), equity and hybrids (15 percent), wholesale issued paper (7 percent), subordinated debt (3 percent), syndicated loans (3 percent) and other credit facilities (5 percent).

Looking Ahead

MBL released its earnings outlook on September 8, without giving explicit earnings guidance.

Macquarie stated that the first half-year of FY22 is likely to be slightly down on the second half-year of FY21. The second half of FY 21 was a particularly strong result.

Overall, this implies a positive result for the year to March 2022 across each business segment:

  • Macquarie Asset Management – $3.3 billion equity raised in 3 months to June 21, supported by growing demand for alternative asset classes in a low interest rate environment.
  • Banking and Financial Services – significant growth anticipated in Home loan and Business banking loan portfolios. Launch of Digital Portfolio Manager that automates investment recommendations, advice documentation and portfolio implementation.
  • Macquarie Capital – strong pipeline of activity in infrastructure and energy investment markets, including digital infrastructure and battery storage.
  • Commodities and Global markets- seeing strong client activity including resources, gas and power and agriculture, partially offset by decreases in global oil.

Macquarie is well positioned to achieve superior performance outcomes in the medium term, supported by geographic diversity, minimal reliance on short-term wholesale funding and surplus capital and liquidity to support growth in uncertain times.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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