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Macquarie (ASX:MQG) share price falling on big FY21 result

The Macquarie Group Ltd (ASX: MQG) share price is falling after the investment bank revealed a strong FY21 result.

Macquarie FY21 report

The global investment bank reported that FY21 net profit came in at $3 billion, which was a 10% increase on FY20.

This came about as the FY21 second half saw $2 billion of net profit generation, up 106% on the FY21 first half and up 59% on the second half of FY20. Net operating income grew 4% to $12.77 billion, whilst expenses were flat at $8.87 billion.

Approximately 68% of total income came from international sources in FY21. That shows that Macquarie is becoming an even more global business than it was before COVID-19.

Whilst net profit grew for Macquarie, assets under management (AUM) actually fell 6% over the year to 31 March 2021, ending at $563.5 billion.

Macquarie’s balance sheet remains well capitalised. It had a group capital surplus of $8.8 billion, with a bank common equity tier 1 (CET1) ratio of 12.6%.

Drilling down into the different divisions, annuity-style activities (mostly asset management and banking) saw a combined net profit of $3.3 billion, down 4% on FY20.

However, market-facing businesses, which is represented by Macquarie Capital and most businesses in commodities and global markets (CGM), saw net profit jump 39% to $2.78 billion.

Macquarie dividend

The board of Macquarie declared a final FY21 ordinary dividend of $3.35 per share. That’s an increase of 86% of the FY20 final dividend.

The total FY21 dividend is $4.70 per share, representing a dividend payout ratio of 56%.

Management comments

Macquarie CEO and Managing Director Shemara Wikramanayake said: “Macquarie’s businesses continued to perform well despite challenging market conditions, reflecting the diversity of our activities and ongoing focus on prudent risk management. Macquarie’s performance reflects our involvement in areas of deep structural need in the global economy and the commitment of our staff to work with clients to address opportunities and challenges in our communities.”

Outlook for Macquarie and the share price

The global investment bank said that it continues to be cautious, with a conservative approach to capital, funding and liquidity that positions it well to respond to the current environment. COVID-19 still means that there’s a lot of uncertainty.

Ms Wikramanayake said that Macquarie remains well positioned to deliver superior performance in the medium term.

I believe that Macquarie is the best ASX share that offers banking services. But the Macquarie share price has risen so much over the last year that I don’t think it’s good value today. It might be wise to wait for another recession, which is when financial businesses seem to drop the most.

Until then, there are other ASX dividend shares that I’ve got my eyes for income.

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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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