By Byron Kaye and Sameer Manekar
SYDNEY (Reuters) – Australia’s top investment bank Macquarie Group (OTC:) reported its annual profit fell by a third, the sharpest decline in 15 years, as stabilizing energy markets put pressure on its commodities trading unit and it made less money from the sale of green energy assets.
Friday’s result came after several years of blockbuster profits from the financial giant’s commodities division, which had benefited from unusually volatile European energy markets following Russia’s invasion of Ukraine and increased demand for oil and gas in North America.
Profits for the Sydney-based company’s main earner fell 47% in the year ended March 31. Together with what the company said was a decision to keep green energy assets in its broader portfolio, the commodities division dragged overall profits up 32% to A$3.5 billion.
The company cut its final dividend to A$3.85 per share from A$4.50 a year earlier.
“It’s clearly been a more challenging environment from a realization perspective,” Chief Financial Officer Alex Harvey said on a call with analysts, referring to the sale of green energy assets.
Macquarie shares fell 2%, versus a 0.6% gain in the broader market, after analysts noted a sharper-than-expected slump in the resources sector, but an overall result in line with forecasts.
“Net headlines show consistent results even if quality appears weak,” analysts at Jarden wrote in a client note.
The company did not provide specific earnings guidance, but said it expected near-term commodity revenues to be “broadly in line” with 2024 results and higher investment-related income from green investments.
Remove ads
.
For Macquarie, “FY24 is a tough year, with activity set to recover in FY25,” Jefferies analysts said in a note.
While Macquarie’s commodities division generated almost half of its profits, the bank said profits grew at its Australian retail banking unit, which generated about a fifth of total profits. The division grew mortgages faster than the overall market and now holds 5.3% of the country’s A$2 trillion in home loans.
Macquarie Capital, the company’s investment banking and advisory arm, which generates about a sixth of profits, increased profits by 31% on growth in its private lending portfolio, offsetting lower M&A revenues due to weaker deal flows.
Total M&A volumes globally rose 30% to around $755.1 billion in the first three months of the year, following a dismal 2023, according to data from Dealogic.
“There’s a huge pent-up pool of transactions waiting to happen,” Macquarie CEO Shemara Wikramanayake told reporters. “Buyers and sellers need to be confident that the market has established itself. We are starting to see that.”
The decline in profits was reflected in wage cuts at the company nicknamed the ‘millionaire’s factory’.
Wikramanayake, the highest-paid employee, collected A$25 million for the year, down from A$33 million the year before, due to a reduced profit share, according to Macquarie’s annual report also published on Friday.
Macquarie’s former head of resources and global markets, Nick O’Kane, previously the company’s highest-paid employee, collected A$1 million for the year, up from A$57 million the year before, after leaving the company in March without the amount of the to have paid out $57 million. time required to obtain his profit share for the year.
Remove ads
.
($1 = 1.5228 Australian dollars)
