Record quarter tempered by predictable caution: Macquarie Group

Macquarie Group (ASX: MQG) was up over 5% at the open after reporting a record quarter of earnings in third quarter FY22 due to what management described as improving market conditions.

While Macquarie attributes the result to commodities and global markets (CGM) and Macquarie Capital businesses - which were “substantially up” in the third quarter to December 31 – management did little to explain exactly what a “record quarter” meant as part of the update.

Deal flow up

Macquarie Capital completed 126 deals in the December quarter valued at $105bn and hinted to a significant uptick in second half deal flow.

Fee revenue grew sharply across advisory, debt capital markets and equity capital markets and investment-related income was up after “exceptionally strong investment realisations”.

Strong commodities income

Due in part to gas, power and resources, commodities and global markets also outperformed on strong commodities income.

However, the group noted that strong commodities and markets and Macquarie Capital performance was partially offset by the timing of income recognition on storage contracts and transport agreements, plus the gain on the partial sale of the UK Meters portfolio of assets.

Annuity-style businesses down

Due to the timing of performance fees and investment-related income, contribution from the group’s annuity-style businesses – its asset management and banking and financial services divisions – was down compared to the third quarter of 2021.

However, management noted that net profit contribution was up for the nine months due to higher volumes in banking and financial services (BFS).

Mortgage business grew rapidly

Comprising its home mortgage business, Macquarie’s banking and financial services division also recorded rapid growth, with total deposits up 4% to $91.6bn during the period, with home loans growing 8% to $82.8bn.

The group’s business banking loan portfolio increased 4% to $11.4bn, while the car loans portfolio fell 12% to $9.6bn.

Macquarie Asset Management (MAM)

Driven by income from Macquarie Infrastructure Corporation and higher base fees, MAM was broadly in line, with assets under management (AUM) of $750.1bn at 31 December 2021, up 2% on 30 September 2021.

Cautious outlook

Despite the record quarter, management continued to deliver the bearish sentiment the group is renowned for and flagged underlying caution within its outlook.

“We continue to maintain a cautious stance, with a conservative approach to capital, funding and liquidity that positions us well to respond to the current environment,” said CEO Shemara Wikramanayake.