Macquarie Group sees annual profit jumping 15% to record levels when the books are ruled off for the 2018-19 on March 31 year, according to a trading update issued yesterday.
If it achieves a 15% rise the result will be close to $3 billion in the year to March 31. If that happens it would be a fourth straight record result.
Macquarie Group shares jumped nearly 4% to a four-month high of $126.22 before easing to $124.60 to be up 2.1% on the day.
The wealth management and financial services group said on Tuesday that a strong performance from Macquarie Capital, which advised on deals including Wesfarmers’ demerger of Coles, had contributed to “significant realisations” over the three months to December.
Macquarie’s cash result improved 15.34% last year to $2.557 billion and another 15% rise in the current year to March would drive full-year earnings to $2.94 billion, and up more than 80% over five years.
New CEO, Shemara Wikramanayake presided over the update briefing yesterday and media reports noted that her message was unchanged from her predecessor and mentor, Nicholas Moore. (In other words bland, Macquariespeak)
“Macquarie remains well positioned to deliver superior performance in the medium term,” Ms. Wikramanayake said.
“This is due to our deep expertise in major markets, strength in diversity and ability to adapt the portfolio mix to changing market conditions, as well as the ongoing benefits of continued cost initiatives, a strong and conservative balance sheet and a proven risk management framework and culture.”
In its statement to the AFX, Macquarie was more forthcoming saying the bank’s less-volatile “annuity-style” earnings were slightly higher than the same quarter last year, while the markets-facing business – its investment banking and capital markets activities – were up “significantly”.
Macquarie said the profit contribution from its flagship funds management business, Macquarie Asset Management, dropped due to lower performance fees, with assets under management falling 2%, mainly due to market movements (That loss should now have been recovered given the rise in most markets since the start of the year).
The portfolio held in its corporate and asset finance business was “broadly” flat at $21.6 billion at December 31, while its domestic banking and financial service arm saw a 3% rise in its deposits and loans in the quarter.
Macquarie also noted that its commodities and global markets division had delivered a “strong” performance from its commodities platform, while investment banking arm Macquarie Capital closed more deals than a year earlier, due to more advisory activity in Europe, Australia, and the US.
But it is not all plain sailing for Australia’s biggest investment bank.
While trading is satisfactory and on track for that record, it confirmed that its chief executive has formally been classified a “suspect” by German authorities looking into an alleged tax fraud scandal.
Ms. Wikramanayake herself updated the market on the German probe. She said authorities in Germany had formally classified 22 former and current bank employees as “persons of interest or suspects”, including herself and predecessor Nicholas Moore. No bank staff had been interviewed yet, she said. Macquarie had previously said 30 executives would be classified as suspects.
The investigation involves other big foreign banks, with the Cologne Prosecutor’s Office (CPO) investigating those banks (including Macquarie) for “assistance to tax fraud” over a 2011 transaction in which Macquarie lent money to Irish hedge funds seeking to take advantage of complex German tax rules.