The Macquarie Group Ltd (ASX: MQG) share price is under scrutiny this morning after telling investors about its FY22 first quarter.
Macquarie’s first quarter
The global investment bank said that it’s seeing improved trading conditions in the first quarter of FY22. The operating group profit contribution was significantly up on the prior corresponding period (pcp), which had mixed trading conditions.
Macquarie revealed that its financial position continues to comfortably exceed regulatory minimum requirements. It had surplus capital of $7.4 billion at 30 June 2021. Its bank CET1 level 2 ratio was 12.1%. This is a solid position.
The business also made an announcement regarding its dividend policy. It said that in order to allow additional flexibility to support business growth, the board has resolved to update its dividend payout policy range to 50% to 70%.
Segment breakdown
Macquarie Asset Management (MAM) finished 30 June 2021 with $693.2 billion of assets under management (AUM), up 23% from 31 March 2021. That was predominately driven by the acquisition of Waddell & Reed.
The banking and financial services (BFS) division saw total deposits increase by 2% over the quarter to $82.4 billion. The home loan portfolio of $71.2 billion at 30 June 2021 was up 6% from 31 March 2021.
The commodities and global markets (CGM) business benefited from favourable market conditions which contributed to strong results across the commodities platform, particularly in North American gas & power and resources driven by trading and client hedging.
Macquarie Capital’s investment-related income was significantly up year on year, whilst merger and acquisition income was up across all regions.
Macquarie said that its annuity style businesses (MAM and BFS) combined profit margin was slightly up year on year. The market-facing businesses of CGM and Macquarie Capital saw profit rise significantly.
Outlook for Macquarie and the share price
The business continues to maintain a cautious stance, with a conservative approach to capital, funding and liquidity so that it can respond well to the current environment. It thinks it’s well positioned to deliver superior performance in the medium-term.
I think Macquarie is the most attractive business involved in banking on the ASX. It continues to perform well. The global diversification is an attractive element of the company.
But with the Macquarie share price close to its all-time high, I don’t think the current earnings valuation is cheap. I have my eyes on other ASX dividend shares for income.
