The company released its softened outlook when it hosted its group operational briefing for the year on Tuesday, following its third quarter of FY2020 (the three months leading up to December).
Macquarie cited a number of factors, including market conditions and geopolitical events, potential regulatory changes and tax uncertainties.
The main downfall named was “significantly lower” investment-related income with Macquarie Capital, compared to a strong prior corresponding period that benefitted from large asset realisations.
The bank also launched a $400 capital raise, through the offer of Macquarie Capital Notes 2 to its shareholders.
However, the annuity-style businesses (Macquarie Asset Management [MAM] and Banking and Financial Services [BFS]) were reported to have higher net profit contributions for the quarter, up on the same period the year before.
MAM has contributed 39 per cent while BFS takes up 13 per cent of the group’s profit.
Their net profit contribution for the nine months leading to 31 December (FY20 YTD) were reported to increase due to higher base and performance fees in MAM and continued volume growth, offset by margin pressure in the BFS segment.
MAM had assets under management (AUM) of $587.5 billion as at 31 December, up 5 per cent on the prior quarter.
Macquarie Investment Management (MIM) saw its assets under management reach $384.2 billion, up 6 per cent on the September quarter.
The boost was said to be mostly driven by acquisition of assets related to the mutual fund management business of Foresters Investment Management and market movements.
In December, Macquarie entered into a sales agreement with Sunsuper, to sell a 25 per cent stake of its aircraft leasing business, Macquarie AirFinance. Months before, Dutch pension fund PGGM had also taken a quarter stake in the business.
Meanwhile, the markets-facing businesses (Commodities and Global Markets (CGM) and Macquarie Capital) saw their combined net profit contribution fall from the year before.
The annuity businesses were projected to produce around 60 per cent of the group’s profit in the first half, while the markets-facing businesses contributed the remaining 40 per cent. In contrast, the split in FY19 was 53:47 for annuities and markets.
CGM was the largest contributor to the group, with a 40 per cent portion of the group’s profit for FY20 YTD, while Macquarie Capital generated 8 per cent.
Despite the downgrade, chief executive Shemara Wikramanayake has remained positive for the longer term future of the bank.
“Macquarie remains well positioned to deliver superior performance in the medium term due to: our deep expertise in major markets, building on our strength in business and geographic diversity and ability to adapt our portfolio mix to changing market conditions; the ongoing program to identify cost savings initiatives and efficiency; a strong and conservative balance sheet and a proven risk management framework and culture,” she said.
The group has released its results after it recently admitted 60 of its former and current staff, including its chief, are suspects in an investigation around a German tax evasion scandal.
Sarah Simpkins
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
