The Macquarie Group has upgraded its expected profit guidance in response to favourable global market conditions, with Morningstar suggesting volatility could be a contributing factor.
In a statement on the ASX, the bank predicted its result for the full year ending 31 March 2015 would be up between 10 and 20 per cent, subject to the completion rate of transactions and the conduct of period-end reviews.
According to the statement, Macquarie’s revised prediction was attributed to “improved trading conditions as well as a lower Australian dollar”.
Commenting on the ASX statement, Morningstar head of financials research David Ellis told InvestorDaily the announcement was unsurprising given the improvement in capital markets over the past 12 months.
“Macquarie [has] been very active in a lot of the IPOs that have come onto the board in 2013 and the volatility in markets benefits their trading businesses,” he said.
In addition, he indicated a weakening Australian dollar had boosted overseas interests.
“The lower dollar has also benefited their offshore earnings because a substantial proportion of their revenue is generated internationally,” he said.
In his view, the company’s ‘market-facing’ businesses were underpinning its increased earnings.
“Their funds management business is going very well – it has been a strong performer for many years – but it's really the market-facing businesses that are starting to increase their profitability as investment markets and capital markets continue to improve,” he said.
He predicted the company positive performance would continue through 2015 provided certain market conditions persist.
“Macquarie is a classic bull market stock so if capital markets activity continues to increase and expand; if equity markets continue to improve; if investor confidence continues to increase; and volatility is higher, then earnings will continue to grow,” he said.
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