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MQG

Macquarie Group – Strong Recovery In Profitability And Capital Raise To Fund Emerging Opportunities

Timothy Anderson

Timothy Anderson is a contributor with the Australian Stock Report and is currently in his final year of studying a Bachelor of Applied Economics and a Bachelor of International Relations and Politics at the University of Canberra. Tim has a genuine passion for economics, specifically in macroeconomic analysis including how certain macroeconomic policies and indicators affect financial markets and the economy, as well as how these factors affect personal investment strategies. Tim currently holds RG146 Tier 1 Generic Knowledge qualifications.

Macquarie Group Ltd (ASX: MQG) is a global provider of banking, financial, advisory, investment and fund management services. Its four business units are Macquarie Asset Management, Banking and Financial Services, Commodities and Global Markets and Macquarie Capital. Macquarie has a market capitalisation of A$73.5 billion.

 

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What is Macquarie’s first half 22 result?

Macquarie announced a net profit after tax of A$2,043 million for the half-year ended 30 September 2021 (1H22), up 107% on the half-year ended 30 September 2020 (1H21) and in line with the A$2,030 million net profit for the half-year ended 31 March 2021 (2H21). The 1H21 result was adversely impacted by the onset of the COVID 19 pandemic. The 1H22 results show that Macquarie’s profitability has fully recovered from the COVID-induced downturn experienced in 1H21. All four of Macquarie’s business units performed strongly in 1H22.

Macquarie’s interim dividend for 1H22 is A$2.72 per share (40% franked), up on the 1H21 interim ordinary dividend of A$1.35 per share (40% franked). This represents a payout ratio of 50%. Macquarie’s dividend policy remains a 50% to 70% annual payout ratio.

 

What is Macquarie Group’s capital position?

Macquarie reported a capital surplus of $A8.4 billion while its Tier 1 capital ratio was 11.7% at 30 September 2021. Macquarie noted that it has deployed A$5.5 billion of capital in 2H21 across its business units to fund new opportunities.

Macquarie continues to see a strong pipeline of opportunities. Consequently, Macquarie has decided to raise A$1.5 billion via an institutional placement, which will be followed by a non-underwritten share purchase plan. This capital raising will provide additional flexibility to invest in new opportunities where the expected risk-adjusted returns are attractive, while maintaining an appropriate capital surplus. The institutional placement is priced at $A190.00 per share, representing a 4% discount to the last closing price of A$197.83.

 

What is the outlook for Macquarie?

Macquarie did not provide specific forward guidance for profitability other than noting a number of short-term risk factors including uncertainty caused by the worldwide economic impact of COVID-19. However, Macquarie remains confident it can continue to generate superior returns over the medium to long term due to the competitive strengths of its businesses.

The market’s reaction to the 1H22 result and capital raise will be known on Monday 1 November 2021, following completion of the capital raise and the recommencement of trading on the ASX. That said, it can be expected that today’s result is broadly in line with expectations.


Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purposes only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceedings. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

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