Performance Fees Drive Upbeat Macquarie

By Glenn Dyer | More Articles by Glenn Dyer

Macquarie Group (MGQ) has delivered an upbeat assessment of income in its first-half ahead of ruling off the books on September 30 (along with its bigger peers, ANZ, NAB and Westpac).

The country’s biggest investment bank yesterday said “stronger performance fees” from its stable of investment funds would allow the company to report a solid result.

Macquarie’s finance chief Patrick Upfold will tell the CLSA Investor Forum in Hong Kong today and tomorrow that; ”As a result of stronger performance fees now anticipated to be recognised in the first half, the 1H18 result is expected to be up on 1H17 and broadly in line with 2H17.”

It would seem that without the “stronger performance fees” the actual trading result might have been lower than forecast, which would be something of an embarrassment for the bank which had been forecasting a solid first half effort.

Investors overlooked that and pushed Macquarie shares up 3% yesterday to close at $85.20.

Macquarie usually issues a number of updates a year – the first is the first is made in February at a finance conference here or offshore, then the second is given with the release of the full year results in early May and another is made in September, usually to a finance conference here or offshore. A fourth is given for the rest of the year when the first half figures are released in late October or early November.

The update to the earnings guidance included the usual Macquarie caveat that it will depend on the completion rate of transactions and September 30 reviews across Macquarie’s five business units.

Mr Upfold reiterated Macquarie’s full year guidance for 2018 earnings to be "broadly in line" with this year’s $2.22 billion result.

Macquarie reported a 7.5% rise in net profit for the year ended March 31, buoyed by advisory income and acquisitions in its corporate and asset finance arm. The result topped analysts’ forecasts.

At the company’s annual general meeting in July, Macquarie chief Nicholas Moore said first-quarter earnings were buoyed by stronger activity in its commodities and global markets unit. At the time, he opted to keep annual profit guidance unchanged.

"The group has deep expertise in major markets and we continue to build on our strength in diversity and adapt our portfolio mix to changing market conditions," Macquarie said.

"We are seeing the ongoing benefits of continued cost initiatives, our balance sheet is strong and conservative, and we have a proven risk management framework and culture."

Chairman Peter Warne in July said the federal government’s bank levy will have an estimated pre-tax annual cost of $66 million.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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