The Macquarie Group Ltd (ASX: MQG) share price is under the spotlight as the investment bank revealed another strong quarter.
Macquarie has four key divisions. Two are described as ‘annuity-style’ – Macquarie Asset Management (MAM) and banking and financial services (BFS) – these are meant to be fairly consistent through economic cycles.
It also has two market-facing divisions which can be more volatile – commodities and global markets (CGM), and Macquarie Capital.
FY23 strength continues for Macquarie shares
Macquarie said that varied conditions for Macquarie’s diverse businesses in the three months to 31 December 2022, which is its FY23 third quarter, resulted in a “good quarter” for the group. This continues the good performance seen in the first half of FY23.
Net profit after tax (NPAT) for the nine months to 31 December 2022 was “slightly up” on the nine months to 31 December 2021. The previous year’s third quarter was a record quarter.
The annuity-style businesses’ combined net profit contribution for the three months was “substantially down” because last year included large green energy sector asset profits on sales. This was partially offset by continued growth in BFS. MAM had assets under management (AUM) of A$797.8 billion at 31 December 2022, while BFS finished with A$125.7 billion of deposits and A$105.4 billion of home loans.
Macquarie’s market-facing businesses combined net profit was “substantially up” in the quarter compared to last year’s third quarter because of the CGM performance, driven by commodities including gas and power contributions across all regions. However, Macquarie Capital did see lower earnings.
Outlook for the Macquarie share price
The investment bank outlined its short-term outlook. In MAM, base fees are expected to be largely flat, while Green Investment Group earnings are expected to be significantly down due to a strong FY22 comparative period.
BFS is expecting more growth and higher margins.
Macquarie Capital is expecting lower transaction activity compared to substantially down compared to a record FY22, with market conditions weakening.
CGM expects a strong FY23.
Leadership commentary
Macquarie Managing Director and Chief Executive Officer, Shemara Wikramanayake said:
Macquarie remains well-positioned to deliver superior performance over the medium term. This is due to our deep expertise in major markets; strength in business and geographic diversity and ability to adapt the portfolio mix to changing market conditions; an ongoing program to identify cost saving initiatives and efficiency; ongoing technology spend across the group; a strong and conservative balance sheet; and a proven risk management framework and culture.
Final thoughts on the Macquarie share price
Macquarie continues to manage profit growth, despite the deterioration of economic conditions. I think the diverse nature of the business has proven its worth in the last few months. Is today good value? I’d prefer to invest when investor confidence is low like during periods of 2022. At the moment, it seems investors are becoming more confident about how 2023 and beyond could go.
