Although it is subscale compared with global peers, Morningstar analyst David Ellis says Macquarie Group has successfully replaced significant revenue streams previously sourced from the highly profitable satellite-fund business model.
“Long-held strengths of adaptability, variable costs, a solid balance sheet, and capable management offset volatile market conditions and place the group in a strong position to leverage the market rebound,” Mr Ellis said.
“Funds management, corporate lending, and asset financing are strong performers, delivering lower-risk income at the same time that Macquarie’s market-dependent businesses start to recover.”
However, Mr Ellis noted that further growth in global capital markets and increased transactional volumes are needed to increase earnings.
“Particularly in the market-facing investment banking businesses,” he added.
Morningstar has previously flagged that Macquarie is “underappreciated” by investors, who fail to see the strength of the group’s five synergistic business units: Macquarie Asset Management; Macquarie Corporate Asset and Finance; Macquarie Banking and Financial Services; Macquarie Commodities and Global Markets, and Macquarie Capital.
Macquarie Group posted a record full-year profit of $2.56 billion over the 12 months to 30 June 2018. The bank’s first-half fiscal 2019 results are due on 2 November. Morningstar has tipped the company to post a six-month net profit of $1.3 billion.
