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Macquarie’s shares climb even as full-year profits dip

We take a look at some of the highlights from Macquarie’s full-year (FY20) earnings results, released to the market 8 Friday.

Macquarie share price Source: Bloomberg

Macquarie FY20 results at a glance

Investors responded bullishly to Macquarie Group's full-year (FY20) earnings release, bidding the financial services company 6.32%, or $6.29 higher, to $105.84 per share by 3:41 pm (AEDT) on Friday.

According to UBS these results were in line with consensus.

Overall, on a year-over-year basis and for the period ending 31 March, Macquarie recorded:

  • Full-year net profits (NPAT) of $2,731 million, down 8%
  • Earnings per share (EPS) of $7.91, down 10%
  • Credit and impairment charges of $1,040 million, up 88%, from $552 million in FY19
  • Assets under management of $606.9 billion, up 10%
  • A final dividend of $1.80 per share, down 50% from FY19's final dividend

Like many other blue-chip Australian financial firms, Macquarie saw the coronavirus impact the company’s bottom-line towards the back half of FY20. As noted above, the firm's full-year net profits (NPAT) came in at $2,731 million – representing a decline of 8% – on a year-over-year basis.

The picture however deteriorates further the closer one looks towards the back-half of MQG's full-year results: In the second-half of FY20, for example, Macquarie's net profits (NPAT) fell 24%, to $1,274 million, when compared to 2H19 net profits.

Uncertainty persists

Reflecting on these results, which the market received positively, Macquarie’s Managing Director and Chief Executive Officer, Shemara Wikramanayake said:

'Macquarie's full-year result has also been subject to the effects of this crisis and a strong underlying financial performance in FY20 was impacted by a material increase in credit and other impairment charges, primarily reflecting the deterioration in current and expected macroeconomic conditions as a result of COVID-19.'

Looking forward and given the current economic uncertainty, Macquarie noted that it would not be providing FY21 guidance at this time.

'We continue to maintain a cautious stance, with a conservative approach to capita, funding and liquidity that positions us well to respond to the current environment,’ Ms Wikramanayake further stressed.

Dividends come in lower

Elsewhere, the current economic uncertainty, coupled with APRA’s recent directive that authorised deposit taking institutions (ADIs) – such as Macquarie – should limit discretionary capital distributions; resulted in MGQ trimming its final dividend.

As noted at the start, the firm’s final dividend came in 50% lower, at $1.80 per share: resulting in Macquarie recording a full-year dividend of $4.30 per share – representing a payout ratio of 56%.

Positively at least, the firm noted that, 'The final dividend will be funded entirely by 2H20 earnings of the Non-Bank Group.'

Firms such as ANZ and Westpac cut their interim dividends completely, while NAB slashed their interim dividend aggressively and at the same time raised $3.5 billion in fresh capital.

How to trade Macquarie – long or short

What do you make of this market announcement: do you see a bullish or bearish opportunity? Trade accordingly. You can use CFDs to trade Macquarie and Australia's big four banks – LONG or SHORT through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) Macquarie using CFDs, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘Macquarie’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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