Macquarie first-half profits boosted by commodities and volatile markets

Macquarie (ASX: MQG) posted a better-than-expected half-year profit of $2.3bn, up 13% compared to the prior period and declared a $3.00 interim dividend. The company's stock is up 2.88% in early trade.

Volatile financial markets and a rise in green investing helped bolster the performance of the Asset Management and Commodities & Global Markets businesses, two heavyweight divisions that contributed a combined 74% to Group net profits in the first half.

Benefiting from market volatility

Summarising the performance of Macquarie's four core business divisions (% contribution to Group profits in the first-half of FY23):

Macquarie Asset Management (31%): Profits came in at $1.4bn, up 28% against the prior period but down -27% compared to the second half of FY22. The comparison against the prior period was also easy as it cycled one-off acquisition and integration costs. The increase was predominately driven by the timing of asset realisations from green energy investing

Banking and Financial Services (13%): Improved margins, higher net interest and trading income supported a 20% rise in net profits to $580m. Deposits rose 19% on March levels to $116.7bn, representing approximately 4.4% of the Australian market

Commodities and Global Markets (43%): Volatile market conditions boosted client activity for risk management, hedging, foreign exchange and financing products, particularly for energy-related sectors. Net profits rose 15% year-on-year but down 9% compared to the previous half.

Macquarie Capital (13%): Weakening market conditions and less M&A activity as well as the cycling of a strong prior period resulted in profits falling -12% to $595m.

Outlook

Macquarie retained a 'cautious stance' on its short-term outlook but reaffirmed its view of delivering 'superior performance in the medium term.'

In terms of the investment bank's near-term outlook for its divisions, it guided towards:

• Macquarie Asset Management: Green investment "expected to be significantly down due to strong FY22 performance. Material gains on realised in 1H23 not expected to recur in 2H23."

• Banking and Financial Services: "Growth in loan portfolio, deposits and platform volumes," and "market dynamics to continue to drive margins."

• Commodities and Global Markets: Marked as difficult to forecast due to the timing of income recognition for energy-related contracts, which is expected to be up following a strong 1H23.

• Macquarie Capital: "Transaction activity is expected to be substantially down on a record FY22, with market conditions weakening in FY23."

Macquarie share price chart