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

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.

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