Macquarie Group shares hit an all time high in Friday’s session after the country’s 5th biggest bank revealed a better than expected profit, a higher dividend and a $1 billion buyback.
The bank revealed a 19% lift in first-half profit of $1.25 billion before trading started and a 15 cents lift in interim dividend to $2.05 a share.
That saw the shares peak at $98.28 in early trading before they eased to around $97.30.
But the timing of the buyback is uncertain, with Macquarie saying that while the buyback has received the necessary regulatory approvals, it is subject to a number of factors including the group’s surplus capital position, market conditions and opportunities to deploy capital by the businesses.
In other words even if all the lights are green for a buyback, if Macquarie thinks it can use the capital more profitably in a deal, then the deal will be done and shareholders will have to wait a bit longer for any capital management.
Macquarie said revenue was up 3.5% at $5.4 billion, so the 19% lift in net profit indicates its profit margins expanded slightly in the quarter, or it did deals with higher profit components. CEO Nicholas Moore said he expects Macquarie’s 2018 full-year result to be “slightly up" on the previous year’s $2.2 billion.
But given substantial performance fees in the first-half, he anticipates second-half results will be lower and broadly in line with its 2017 second-half. That is perhaps why the shares came off their all time peaks on Friday.
“Macquarie remains well positioned to deliver superior performance in the medium term due to our deep expertise in major markets, strength in diversity and ability to adapt the portfolio mix to changing market conditions,” Mr Moore said in Friday’s release.
Macquarie reported a 17% lift in fee and commission income to $2.6 billion in the half year, thanks mostly to higher fee income from the US debt capital markets business.
The group’s annuity-style businesses’ net profit (such as funds management which make steady regular contributions) contribution was up 28%. The business is the heart of Macquarie and was around 80% of its first-half performance.
Macquarie also announced that former Reserve Bank of Australia Governor Glenn Stevens will join the boards of Macquarie Group and Macquarie Bank as an independent director from November 1.