Australia’s Macquarie to buy back shares as profit slips to three-year low

By Lewis Jackson and Roushni Nair

SYDNEY (Reuters) -Australia’s Macquarie Group (OTC:) on Friday reported its lowest half-year profit in three years, with first-half earnings down 39% to pre-pandemic levels due to rising costs and declines in its commodity trading and asset management segments.

Macquarie had already trimmed its earnings forecasts twice since its record fiscal 2023 results announced in May, but the A$1.42 billion ($913.49 million) profit for the half ended Sept. 30 was well below a consensus estimate of A$1.77 billion compiled by Citi.

It was biggest percentage profit decline in more than a decade amid less volatility in commodity prices and higher costs in all divisions with total staff numbers rising 10% from a year earlier. Shares fell as much as 3% in early trading before regaining ground to trade flat.

Macquarie said in a statement the financial conglomerate maintained a cautious stance and was conservatively positioned.

Despite the weaker result, the company’s board approved an on-market share buyback of up to A$2 billion and declared an interim dividend of A$2.55 per share, citing its ability to return excess capital to investors.

UBS said in a note the results would lead markets to further cut earnings forecasts.

“The only silver lining, in our view, is the buyback, which might indicate Macquarie view the stock as undervalued,” UBS said.

The company’s A$A892 billion asset management division led the earnings decline, with profits down 71% to A$407 million, roughly half the level tipped by analysts. Macquarie pinned the fall on rising expenses and its decision to hold off on green asset sales.

Macquarie said the division’s income should rebound somewhat to around the A$940 million mark it reported in the last half as it booked asset sales.

Profits in the heavyweight commodities and global markets segment fell 31% to A$1,4 billion as a degree of normalcy returned to energy markets after the chaos last year unleashed by Russia’s invasion of Ukraine.

The company said fees and commissions at investment banking arm Macquarie Capital were in line with the previous comparable period. Profit fell 28% to A$430 million.

Despite a global dealmaking drought, the division guided to full-year transaction activity in line with the prior financial year.

Earnings in the banking and financial services division, home to Australia’s fifth-largest retail mortgage business, were a rare bright spot and rose 10% to A$638 million on the back of loan growth and stronger margins.

($1 = 1.5550 Australian dollars)