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Macquarie Group Ltd (MQG) just updated the market

Macquarie Group Ltd (ASX: MQG), Australia’s largest investment bank, today released its 3Q20 trading update. Macquarie’s third-quarter ends in December.

Unlike a traditional ‘retail’ bank, like most investment banks Macquarie makes a large chunk of its profit by operating in the investment markets and managing ‘assets’ for individuals and organisations.

Macquarie Trading Update – Key Points

In an ASX release today, Macquarie provided an operational briefing to investors saying that trading conditions “were satisfactory” in the December (3Q20) quarter.

Since Macquarie releases its periodic reports at a different time of year to most companies, Macquarie was able to provide a short update on its key business lines.

In the bank’s annuity-style businesses, which includes Macquarie Asset Management and vanilla banking products found in the Banking and Financial Services (BFS) division, the bank said the profit contribution result was up on the same period a year earlier thanks to a higher base of funds under management and performance fees.

Across the hallway, Macquarie’s market-facing businesses reported a combined net profit contribution which was “significantly down” on the same quarter from 2019.

The bank said the weaker result was due to meaningfully lower investment-related income from its Macquarie Capital business.

In terms of its financial position, Macquarie said its capital base exceeds the regulatory minimum, with over $5.8 billion of surplus capital on its balance sheet. With higher regulatory minimums being placed on the banking system, locally and abroad, this is a key consideration for many bankers.

Outlook

Looking ahead, the company expects to report a full-year result slightly down on last year but CEO Shemara Wikramanayake said the bank is positioned to deliver superior performance over the medium term.

“Macquarie remains well positioned to deliver superior performance in the medium term due to: our deep expertise in major markets, building on our strength in business and geographic diversity and ability to adapt our portfolio mix to changing market conditions; the ongoing program to identify cost saving initiatives and efficiency; a strong and conservative balance sheet and a proven risk management framework and culture.”

Macquarie shares were last seen trading at $146.34, giving the company a market capitalisation more than $50 billion.

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