Australia’s Macquarie shares slide as first half profit misses consensus

Audio By Carbonatix

Enlarge

By Scott Murdoch

(Reuters) -Investors sold off shares in Australia’s biggest investment bank Macquarie Group on Friday after it reported first-half profits that fell short of expectations, with low volatility in markets driving profits from its commodities unit down 15%.

Overall first-half profit rose by 3% compared to last year, lifted by gains from its asset management unit, but was still about 12% below the market’s expectation.

Macquarie shares closed down 5.74% on Friday, as the S&P/ASX200 was off 0.66%. The bank’s shares are down 7.6% for the year, compared to a near 14% rise in the ASX’s financials index.

Macquarie said net profit was A$1.66 billion ($1.08 billion) for the six months ended September 30, higher than A$1.61 billion a year earlier.

Profit from its asset management unit rose 43% on higher performance fees from data-centre assets such as AirTrunk and Aligned, the U.S. business sold by Macquarie last month for $40 billion.

However, the overall profit missed a Visible Alpha consensus estimate of A$1.86 billion as net profit from its commodities and global markets unit, one of its biggest contributors, declined 15% to A$1.11 billion.

“The market will need to trust in management to deliver a much stronger second half in order to meet (full-year) consensus forecasts,” UBS analysts wrote in a research note.

UBS analysts had forecast Macquarie’s net profit could be as high as A$1.99 for the first half. The consensus full-year net profit stands at A$4.2 billion.

Chief executive Shemara Wikramanayake said the lack of volatility in global commodities markets had contributed to the lower earnings. Macquarie’s commodities business benefits from trading during bouts of market volatility.

“It has been a very subdued environment globally for commodities,” she told an analysts’ call.

She added the commodity business’s performance in the second half was expected to be in line with the first half.

Wikramanayake played down prospects she could leave Macquarie anytime soon after having been in the bank’s top job for seven years.

The departure of Chief Financial Officer Alex Harvey at the end of 2025, touted as a potential successor to Wikramanayake, had prompted analysts to question whether her tenure could be lengthened.

“We have a lot of depth of talent and basically we stay in our roles as long as we think we are needed and if we can find somebody that can take on the role and deliver for the organisation what it wants,” Wikramanayake told Reuters in a phone interview.

Macquarie has made a concerted push into Australia’s ultra-competitive mortgage market, taking share from the major “top four” banks which dominate home lending.

Profit for the banking and financial services segment jumped 22% on growth in the home loan portfolio and deposits.

Macquarie now has an A$160.3 billion mortgage book and a 6.5% market share, up from A$67 billion and a 3.5% market share five years ago.

The bank has been in the crosshairs of Australian regulators and in September agreed to repay A$321 million to investors who had bought into the now-collapsed Shield Master Fund through one of the bank’s platforms.

Profit from its Macquarie Capital division surged 92%, benefiting from higher income from mergers and acquisitions and brokerage fees.

Australia’s top investment bank will extend its A$2 billion buy-back of shares for the next 12 months. It said it had bought back about A$1 billion worth of stock so far.

The company declared an interim dividend of A$2.80 per share, higher than the A$2.60 declared last year.

($1 = 1.5389 Australian dollars)

(Reporting by John Biju in Bengaluru; Editing by Tasim Zahid, Sriraj Kalluvila, Chris Reese, Peter Graff)