Macquarie Group’s shares climbed to a new high after the investment bank reported a record profit for the first half of 2018, beating analysts’ expectations and upgrading its full-year earnings forecast.
Australia’s biggest investment bank benefited from a strong performance from its “annuity-style” businesses that generate recurring income, which enabled the group to report a 19 per cent year-on-year increase in net profit after tax to A$1.24bn ($949.3m) in the six months to the end of September.
Analysts had forecast net profit of A$1.14bn.
Macquarie said it expected its combined net profit for the full year 2018 to be slightly up on the prior year’s record of A$2.2bn, although it said profits in the second half of 2018 would be slightly lower than in the first half.
“Macquarie is well positioned to deliver superior performance in the medium term,” said Nicholas Moore, Macquarie chief executive.
“The group remains well positioned, with a strong and diverse global platform and deep expertise across a range of products and asset classes.”
Shares in Macquarie, which became known as the “Millionaires Factory” before the global financial crisis, climbed as much as 4.3 per cent to A$98.28 following the results release. The share price surpasses the previous record of A$97.10 achieved before the global financial crisis.
The bank approved a share buyback worth up to A$1bn, although Mr Moore said there was no timetable for the stock repurchase. Macquarie’s return on equity in the first half of 2018 was 16.7 per cent, up from 14.6 per cent in the same period a year earlier.
Macquarie’s strong financial performance in recent years stands in contrast to some of its larger peers, reflecting its focus on annuity-style businesses such as wealth management and banking services that comprised 80 per cent of net profits in the first half.
Macquarie’s asset management unit raked in performance fees worth A$537m in the first half, compared with A$170m for the same period a year earlier. The combined profit contribution from its capital markets facing businesses, which include commodities and deal advisory, fell 18 per cent to A$568m, reflecting lower M&A fee income in the US, reduced income from energy asset sales and lower commodity trading.
In a note to clients, Citigroup analysts said the share buyback was a “positive surprise” but cautioned on the performance of some of Macquarie’s divisions.
“Across the divisions they look to be struggling but they have pulled out a big performance fee to deliver the numbers yet again,” they added.
Macquarie has moved to beef up its board by appointing Glenn Stevens, former governor of the Reserve Bank of Australia, as an independent director from November 1.
Stephen Allen, Macquarie’s chief risk officer, will step down from December 31 and be replaced by Patrick Upfold, chief financial officer. Alex Harvey, head of transactions at Macquarie Capital, will succeed Mr Upfold as chief financial officer.