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HY21: Macquarie (ASX:MQG) shares on watch after report

Macquarie Group Ltd (ASX: MQG) shares will be on watch today after the global investment bank reported its FY21 half-year result.

What was in Macquarie’s HY21 report?

Macquarie reported that its half year net profit was $985 million. That represents a drop of 32% from the first half of FY20 and a decline of 23% from the second half of FY20.

Credit and other impairment charges amounted to $447 million, up from $139 million in the first half of FY20. This is primarily related to a deterioration in the current and expected macroeconomic conditions due to the COVID-19 pandemic.

Macquarie reported that of its total income, 68% was generated internationally.

The global investment bank said that its ‘annuity-style activities’, which relate to Macquarie Asset Management (MAM), banking and financial services (BFS) and certain businesses in commodities and global markets (CGM), generated a combined net profit of $1.6 billion, down 7% on the prior corresponding period.

Market-facing activities, which are undertaken by Macquarie Capital and most businesses in CGM, delivered a net profit combination of $672 million, down 42% from the prior corresponding period.

Assets under management (AUM)

Macquarie reported that its AUM was $556.3 billion at 30 September 2020, this was a decline of 7% from six months ago at 31 March 2020.

Balance sheet

Macquarie reassured investors by saying that its financial position was comfortably higher than regulatory minimum requirements with surplus capital of $9.4 billion.

Its bank had a CET1 capital ratio of 13.5%, which is higher than the big four ASX banks like Commonwealth Bank of Australia (ASX: CBA).

Macquarie dividend

The board of Macquarie decided to pay an interim dividend of $1.35 per share, this represents a cut of 46% compared to last year.

Time to buy Macquarie shares?

Macquarie said that market conditions are likely to remain challenging under the current COVID-19 conditions and the unknown speed of the global economic recovery.

Based on the uncertainty, Macquarie isn’t sure how much conditions will impact FY21 profit – so forecasting is extremely difficult and it can’t provide any guidance.

However, Macquarie management believe the business is well-positioned to deliver “superior performance” in the medium term with its earnings diversification, staff, ability to adapt to changing conditions and its strong balance sheet.

I’d tend to agree, Macquarie is a quality business worth a place in a blue chip portfolio. However, if I were looking to buy a financial share I think I’d rather go for Magellan Financial Group Ltd (ASX: MFG) which is still expanding its business in multiple directions, whilst still growing its core funds under management (FUM).

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Are you stuck wondering where to invest right now? Have you got cash 'sitting on the sidelines'? Are you looking for dividend income AND growth but don't know where to start? Rask's expert ASX analyst team has just released a full report, detailing where we'd invest $10,000 right now.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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