Macquarie Group has joined its larger peers in cutting its dividend after a slide in earnings.
The investment bank said on Friday that first-half earnings fell 32% to $985 million as at September 30 as impairments and other costs in its Key Capital arm rose thanks to the continuing ripples from the COVID-19 pandemic.
In fact, Macquarie Capital saw a $400 million reversal of fortunes from a profit to a loss in the September quarter. The Group had last month warned it would see a first-half profit drop of 35% from last year’s record $1.46 billion result.
The group slashed interim dividend by 46% to $1.35 a share – a smaller (but still large cut) than larger peers such as Westpac, ANZ, and NAB.
Net revenue fell 13% to $5.52 billion from the first half of 2019-20.
The damage was done by a poor performance in Macquarie’s key markets-facing businesses, which are undertaken by Macquarie Capital and most businesses in Commodities and Global Markets, delivered a combined net profit contribution of $672 million, down 42% over the year and 22% from the second half to March this year.
The poor performance of Macquarie Capital stood out in Friday’s report.
The division incurred a net loss of $189 million, down from a $221 million net profit contribution in the first half of 2019-20. That’s a $410 million about turn into a large loss.
“The result reflected significantly lower investment-related income, lower fee and commission income and higher credit and other impairment charges partially offset by lower operating expenses,” Macquarie explained.
The annuity-style activities undertaken by Macquarie Asset Management (MAM), Banking and Financial Services (BFS) and certain businesses in Commodities and Global Markets (CGM), saw a combined net profit contribution of $1,600 million, down 7% over the year and on the March, 2020 half year.
“Recent months have been overshadowed by the profound human impact of the COVID-19 global health crisis and its economic consequences,” chief executive Shemara Wikramanayake said in Friday’s statement.
Macquarie said its assets under management at September 30 were $556.3 billion, down 7% from $598.9 billion at March 2020, and “largely due to foreign exchange impacts and a reduction in contractual insurance assets in Macquarie Investment Management.”