Macquarie 1H25 Earnings Call Highlights

Macquarie (ASX: MQG) shares dipped 3.5% last Friday after its first-half FY25 earnings missed market expectations.

1H25 Earnings Summary

• Net profit up 14% to $1.61 billion but below market expectations of $1.72 billion

• Interim dividend of $2.60 per share, 35% franked

• Board approved extension of up to $2 billion buyback for a further 12 months

• Outlook: Macquarie continues to maintain a cautious stance, with a conservative approach to capital, funding and liquidity that positions it well to respond to the current environment.

Earnings Call Highlights

The below topics have been answered by CEO Shemara Wikramanayake and CFO Alex Harvey.

1H25 earnings: "Reported a net profit of $1.61 billion, a 14% increase year-on-year but a 23% decline from the previous half, with an ROE of 9.9% (up from 8.7% YoY). Revenue split was 53% from annuity-style businesses and 47% from markets-facing businesses, indicating a balanced growth across business areas."

Commodity and global market segment performance: "GM delivered $1.31 billion, down 5% YoY, with 43% of total earnings. Financial markets and asset finance results were robust, especially in foreign exchange, interest rates, and credit markets. However, client activity was subdued in the commodities sector, especially in global gas, power, and oil markets, partly due to increased supply capacity."

Macquarie asset management performance: "MAM achieved $684 million, up 68% YoY, driven largely by performance fees and growth in assets under management (AUM), which stood at $916.8 billion, a slight 2% decrease YoY. The reduction was due to forex impacts and some divestments, partly offset by asset value appreciation."

Commodities trading and trends: "Commodities saw decreased client activity, especially in global gas, power, and oil. Metals trading was an exception, performing well despite market pressures. Increased supply capacity and lower volatility were identified as factors for subdued trading volumes."

Banking and financial performance/trends: "BFS contributed $650 million, up 2% YoY, driven by growth in home loans, business banking, funds on the platform, and deposits. Competitive margin pressures continued to impact profitability. However, digitalisation initiatives have led to significant operational efficiencies, supporting profit levels."

Macquarie capital transaction activity: "Macquarie Capital's result was $371 million, down 14% YoY, contributing 12% to earnings. The division focused on private credit, with a portfolio reaching $22.5 billion. Transaction fees increased slightly, but weaker investment-grade debt markets and slower corporate activity dampened results."

Private credit portfolio: "The private credit portfolio expanded significantly to $22.5 billion, with $5 billion deployed in 1H25. Early investments showed a short-term drag on earnings due to funding costs and provisioning but signaled a strategic focus on this high-growth area."

Analyst Q&A Highlights

What are the supply-side issues in CGM and what's expected for the Northern Hemisphere winter in the second half: “We are seeing through this most recent second quarter that there is strong supply, particularly in energy markets, but across the board in North America and Europe ... Storage levels are very high ... they've been able to reduce their energy demand by 20% since the Russian invasion of Ukraine.”

For 2026, what are the potential impacts from selling large green assets in MAM: “The expenditure in relation to those portfolios we said will be broadly in line at several hundred million dollars a year that we're incurring in OpEx and DevEx ... So, whilst it might affect lumpiness of timing of the income and expenditure, the team are very experienced in investing these asset classes and very disciplined about it ... this year's expenditure is broadly in line with last year's.”

How will Macquarie improve RoE: "We announced the $2 billion buyback and we bought back $1 billion over the last 12 months. But very pleasingly, over the course of that 12 months, we invested, I think it's $1.2 billion of additional capital into opportunities all around the world."

Is 9.9% RoE acceptable given Macquarie's strong capital position: "The main thing I'd point out, Brian, is that 9.9% is a first half return and we had 14% as our average for the last 18 years ... We feel comfortable over the medium term that we can be delivering these low to mid-teens ROE after our large surplus capital positions."

What is Macquarie's view on M&A opportunities: "As the rocketing we've had of interest rates globally has started to ease ... buyers and sellers are starting meet on price more and activity level is picked up in M&A."