Macquarie Group Profit Beats Estimates on Asset Sales (1)

(Bloomberg) -- Macquarie Group Ltd., the world’s largest manager of infrastructure funds, reported first-half profit fell less than estimated, and forecast full-year earnings will be broadly in line with last year’s record result.

Net income in the six months ended Sept. 30 declined 2 percent to A$1.05 billion ($797 million) from A$1.07 billion a year earlier, the Sydney-based bank said in a regulatory filing on Friday. That topped the A$994.5 million mean estimate of four analysts surveyed by Bloomberg.

Chief Executive Officer Nicholas Moore has focused in recent years on expanding the bank’s stable businesses such as lending and leasing to shield earnings from the cyclical nature of investment banking fees. Macquarie is also benefiting as investors hunt for higher-yielding assets as global interest rates seem poised to remain lower for longer.

Macquarie said it would pay an interim dividend of A$1.90 per share, up from the A$1.60 paid in the first half of 2016.

“Positive earnings and dividend surprise make for a positive result" Credit Suisse Group AG analysts led by James Ellis wrote in a note to clients.

Macquarie shares rose as much as 1.7 percent in early Sydney trading, and were up 53 cents to A$80.93 at 10:10 a.m. local time.

Global Platform

The results show the “strength of Macquarie’s global platform, the benefit of recent acquisitions and its ability to adapt to changing conditions,” Moore said in the statement. International income accounted for approximately 60 percent of the group’s income in the first half.

Earnings were boosted by A$684 million of income tied to asset sales, including Macquarie Life’s risk insurance business, and reduced exposure to under-performing commodity loans. Combined net interest and trading income fell 18 percent, and fee and commission income dropped 21 percent.

Acquisitions of the AWAS aircraft leasing business and Esanda dealer finance contributed to earnings in the half, Macquarie said.

Full-year earnings are expected to be “broadly in line” with last year’s record income, Moore said in the statement.

“While the absence of an upgrade to full-year guidance is disappointing, we continue to believe Macquarie’s guidance is conservative,” CLSA analyst Ed Henning wrote in a note to clients. “Macquarie have a history of beating the top end of guidance.”

The report comes after global rivals Goldman Sachs Group Inc. and JPMorgan Chase & Co. both posted better-than-expected results this month on the back of higher revenue from fixed-income trading.

Result highlights

• Operating income fell 2 percent to A$5.22 billion

• Assets under management rose 3 percent in the half to A$493.1 billion

• Earnings per share fell 4 percent to A$3.12

• Annualized return on equity 14.6 percent v 15.8 percent

• Costs rose 1 percent to A$3.73 billion

• Staff numbers fell 556 to 13,816 at Sept. 30 vs 14,372 at March 31

(Adds analyst comment in fifth paragraph, shares in sixth.)

To contact the reporter on this story: Emily Cadman in Sydney at ecadman2@bloomberg.net. To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Darren Boey, Peter Vercoe

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