The Macquarie Group Ltd (ASX: MQG) share price is down over 4% after the investment bank announced weaker trading conditions led to lower profit in the FY24 first quarter.
Macquarie is a large investment bank with global operations, including a growing banking service in Australia.
FY24 first quarter
The financial giant said that weaker trading conditions led to the FY24 first quarter net profit contribution being “substantially down” on the first quarter of FY23.
Macquarie said that its annuity-style businesses – Macquarie Asset Management (MAM) and banking and financial services (BFS) combined profit was down substantially on the FY23 first quarter, primarily due to lower investment-related income from green energy investments in MAM.
The BFS contribution was “significantly up” thanks to growth in the loan portfolio and deposits, combined with improved margins. MAM finished June 2023 with A$864.2 billion of assets under management (AUM).
Its market-facing businesses and commodities and global markets (CGM) and Macquarie Capital saw a FY24 net profit contribution that was “down substantially” as well, due to a strong result for CGM in the first quarter of FY24.
Macquarie Capital saw lower investment income compared to last year, with fewer material asset realisations, partially offset by an increase in income from its private credit portfolio.
Outlook for the Macquarie share price
Macquarie said, as it usually does, that it’s going to maintain a cautious stance with a conservative approach to capital, funding and liquidity that positions it well to respond to the current environment.
It also said that it remains “well-positioned to deliver super performance”.
I’m not surprised that Macquarie shares are down in response to news that profit is “substantially down”. We’ll have to see in the FY24 first half result how much profit has actually fallen.
Macquarie has proven over the last decade that it’s a great business and it continues to invest in compelling sectors (like green energy). CGM profit wasn’t likely to keep going up every year forever, but could rebound in the medium-term.
Profit growth is likely, in my opinion, to be slower over the next couple of years because of economic conditions and the fact it has already grown so much. It’s probably one of the better ASX blue chips, but it’s not one I’m looking to invest in at the moment. There are other ASX dividend shares I’d rather buy.
