Macquarie Group says the outlook remains highly uncertain, with profits dipping slightly in the first quarter as its businesses face challenges from rising bad debts and a softer market for selling assets.
Results from the ANZ Bank and Macquarie Group will dominate an otherwise quiet week. The big issue for investors will be the level of dividends both banks declare after the strong advice from the key regulator APRA.
APRA, the financial regulator, has told banks, insurers, and other financial groups to think carefully about deciding whether dividends can be paid to shareholders over the rest of this year and into 2021.
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Credit Suisse continues to believe Macquarie Group is a quality business but there are multiple headwinds over the short-term around transaction volumes, asset realisations and the potential for further impairments.
Macquarie's result was largely in line with consensus and relatively clean and solid, the broker suggests. The Group is tracking well against FY guidance of "slightly lower" but is cycling a very strong second half last year, Morgans notes.
Macquarie surprised friend and foe yesterday by announcing a fresh $1bn capital raising plus a share purchase plan which Citi estimates has the magnitude of $150m. Estimates have been sliced to incorporate the immediate dilution.
FY19 results were strong and net profit up 17%. FY20 guidance was softer than expected, with Macquarie Group suggesting net profit may be slightly down on FY19. Morgans reduces estimates for earnings per share by -5-7%.
Broker Call Report already reported on Friday Morgan Stanley analysts have increased their confidence regarding Macquarie's growth outlook, and the result has been a shift in their price target to $140 from $133.