Macquarie profits beat analyst expectations on energy volatility; shares soar to nine month high

Macquarie Group (ASX: MQG) continues to navigate volatile market conditions with success and on-track for a record year, should commodity markets remain elevated.

Macquarie shares rallied 1.9% in early trade to a fresh nine-month high,  and bringing its year-to-date performance to a cool 14.7%.

3Q22 Market Update

The update provided was light on details. Macquarie said its net profit after tax for the nine months to 31 December 2022 was 'slightly up' compared to a year ago.

Taking a closer look at Macquarie's four core business divisions (and the percentage each business contributed to Group profits in the first-half of FY23): Macquarie Asset Management (31%)

• Assets under management of $797.8 billion broadly in-line with the September quarter

• Based fees expected to be broadly in-line as private markets offset unfavourable market movements

Banking and Financial Services (13%)

• Total deposits of $125.7 billion up 8% compared to the prior quarter

• Growth in both Macquarie's loan portfolio, deposits and platform volumes

• Rising interest rates driving margins

• Higher expenses to support volume growth

Commodities and Global Markets (43%)

• "Exceptionally strong" quarter thanks to increase trading, physical execution and logistics from energy markets

• FY23 year-to-date commodities income expected to be "substantially up" in FY22

Macquarie Capital (13%)

• Completed 84 transactions valued at $92 billion in the December quarter

• Fee revenue "significantly down" year-on-year but higher compared to the prior period

UBS: Better than expected

UBS was quick to run the ruler on the commentary in Macquarie's third quarter update, dubbing the update:

A better than expected result, commodities and global markets the standout, market-facing businesses weaker.

UBS views the 'slightly up' FY23 year-to-date earnings and positive June quarter outlook as "an overall better result relative to VisibleAlpha consensus, which has FY23 earnings down ~6%."

"Macquarie's share price is +14% year-to-date, with the market in our view pricing in the likelihood of an improved performance from more market sensitive MAM and MacCap divisions in FY24 on the back of recovering asset prices," UBS said.

The note reaffirmed a BUY rating with a $190.00 target price. At the time of writing, Macquarie’s share price was trading at $192.10.