Challenges ahead
Macquarie earnings tipped to take hit
MACQUARIE Group has flagged a 35 per cent drop in earnings for the first half and says its overall profitability for the full financial year is uncertain.
The investment banking heavyweight on Monday said it expected its first half result — covering the six months to September — to be down about 35 per cent from the same period a year ago.
Compared with the six months to March, it was likely to be down about 25 per cent, the group said. Shares in Macquarie fell sharply after the trading update, dropping as much as 5.6 per cent. They recovered some ground later in the day but still ended the session down 4.7 per cent at $120.20.
“Macquarie states that market conditions are likely to remain challenging, especially given the significant and unprecedented uncertainty caused by the worldwide impact of COVID-19 and the uncertain speed of the global economic recovery,” the company said.
“We continue to maintain a cautious stance, with a conservative approach to capital, funding and liquidity that positions us well to respond to the current environment.”
The investment bank released the statement ahead of a presentation for investors.
Analysts at stockbroker Ord Minnett said the 35 per cent dip in earnings implied a net profit of about $950m, which they said was close to market estimates.
The analysts forecast a strong rebound in profitability of about 6 per cent above market estimates for the second half of Macquarie’s financial year, reflecting higher gains on sale and performance fees, as well as lower impairments and provisions.
Macquarie did not provide an earnings forecast for the full year.
Chief executive Shemara Wikramanayke said market conditions were likely to remain challenging. Still, Macquarie said on Monday that it remained well-positioned to deliver a “superior” performance in the medium term, given its strong balance sheet and its ongoing program to identify cost saving initiatives.
Potential regulatory changes, tax uncertainties, market conditions and the impact of geopolitical events ere also among factors that would affect the outlook on top of COVID-19 issues.