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Macquarie wealth slips, capital and commodities surge

Macquarie wealth slips, capital and commodities surge

Sarah Simpkins
— 1 minute read

While Macquarie Group saw its wealth management income drop by $18 million, its capital and commodities businesses soared during FY19.

Macquarie generated a net profit of $2.9 billion, going up by 17 per cent on FY18. The group’s net profit of $1.6 billion for the second half of FY19 increased by 28 per cent from the year before.

The Banking and Financial Services segment saw its profit go up by 3 per cent to $737 million, reflecting growth in Australian mortgage, business banking loan, deposit and funds on platform average volumes.

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However, wealth income fell, with the business saying it is working towards realigning itself to focus on the high-net-worth segment. It also factored in increased technology costs.

Wealth management fee income dropped by 6 per cent to $315 million. It decreased by 13 per cent from the prior half to $147 million in H2.

Funds on platform with Macquarie Wrap and Vision were recorded at $86 billion, up 4 per cent form the prior year. Macquarie Wrap saw its assets under management roughly double from $1.1 billion in FY18 to $2.3 billion in this full year.

The group’s markets-facing businesses, Commodities and Global Markets (CGM) and Macquarie Capital, saw their profit go up by 76 per cent from the year before to $2.8 billion.

CGM surged in the full year, up 65 per cent from FY18 to $1.5 billion, as a result of strong results in the commodities platform in the US, Macquarie said.

Macquarie Capital on the other hand made a profit of $1.3 billion for the full year, rising by 89 per cent from FY18. Macquarie said it saw higher investment-related income due to asset realisations and increased fee and commission income.

Group head of Macquarie Capital Tim Bishop has stepped down from his role after being with the company for 20 years.

Replacing him will be new co-heads Daniel Wong, current global co-head of the infrastructure and energy group, based in London, and Michael Silverton, currently head of the Americas, Europe and Asia group located in New York.

Mr Bishop will become chairman of the Capital business to assist with the transition.

The market-facing segments represented approximately 47 per cent of the group’s FY19 performance, while Macquarie’s annuity-style businesses (Macquarie Asset Management, Corporate and Asset Finance and Banking and Financial Services) represented 53 per cent of the group’s profit.

The annuity segments produced a combined net profit contribution of $3.2 billion, down 4 per cent on the year before.

Compliance spend increased by 14 per cent from FY18, totalling at $496 million for the full year. The company spent $6 million on royal commission costs.

Annualised return on equity (ROE) was 18 per cent, up from 16.8 per cent in FY18.

Earnings per share came to $8.83, up 17 per cent on the year before.

Assets under management came to $551.3 billion, up 11 per cent from the prior corresponding period.

Macquarie said the growth largely came about due to investments made by its Macquarie Infrastructure and Real Asset (MIRA) managed funds, in addition to foreign exchange impacts and contributions from businesses acquired during the period.

The asset management business delivered a net profit of $1.5 billion for the full year, down 4 per cent from $1.55 billion the year before.

Base fees for the year came to $1.5 million, up by 10 per cent, which Macquarie said was driven by growth in assets under management.

Performance fees in the asset management business were $765 million, a boost of 28 per cent from the prior year. The increase was attributed to MIRA-managed funds, managed accounts and co-investors.

Offsetting the growth in asset management, however, was a 27 per cent fall in investment-related and other income to $427 million. Operating expenses were also said to be higher.

The corporate and asset finance division produced a profit of $1 billion for the year, down 10 per cent from FY18. The company cited the impact of reduced provisions and impairments in the prior year, along with one-off investment-related income in Asset Finance in the prior year.

During FY19, Macquarie said it advised on 417 transactions valued at $748 billion.

Macquarie is now expecting its result for FY20 to be slightly down on this year.

Shemara Wikramanayake, chief executive of Macquarie, received a pay packet larger than that of the big four’s bosses combined, collecting $17 million for FY19. She took over from former boss Nicholas Moore in December.

Mr Moore received $13.6 million, decreasing from $18.9 million in the 2018 financial year.

 

Macquarie wealth slips, capital and commodities surge
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