Macquarie Bank has braced itself for dicey conditions in the ongoing COVID crisis, with its full-year outlook up in the air, after its profit for the first half dwindled by a third year-on-year.
The group posted a net profit of $985 million for the first half of financial year 2021, ended 30 September, which sunk by 32 per cent from the prior year and by 23 per cent from the prior half.
The profit was eaten into by credit and other impairment charges of $447 million as the group continues to face deteriorated conditions through the COVID pandemic.
Assets under management were down by 7 per cent from the last half, to $556.3 million at the end of September, hit by foreign exchange impacts and reduced contractual insurance assets in Macquarie Investment Management.
Macquarie managing director and chief executive Shemara Wikramanayake commented the half had been overshadowed by the “human impact of the COVID-19 global health crisis and its economic consequences”.
The board declared a first-half ordinary dividend of $1.35 per share (40 per cent franked), almost half of the prior year’s $2.50 payout.
Market conditions are expected to remain challenging, with the pace of the global economic recovery from COVID uncertain.
Macquarie stated the extent to which the conditions will impact its FY21 profitability is uncertain, with it expecting its short-term outlook to be shaped by the duration and severity of the COVID pandemic, the recovery, levels of government support for economies, regulatory changes, tax uncertainties and geopolitical events among other factors.
“While the economic impacts of the COVID-19 pandemic continue to be felt in the short-term, Macquarie remains well-positioned to deliver superior performance in the medium term,” Ms Wikramanayake said.
The market-facing segments, Macquarie Capital and most businesses in CGM, delivered a combined net profit contribution of $672 million during the half year, plunging by 42 per cent on the prior corresponding period (pcp).
Macquarie Capital copped a net loss of $189 million for the half, a dramatic change from its $221 million profit the year before.
The segment was reported to have seen significantly lower investment income, fee and compression income, while being struck by higher credit and other impairment charges.
Meanwhile the annuity-style businesses, including Macquarie Asset Management, Banking and Financial Services and certain businesses in Commodities and Global Markets (CGM), generated a combined net profit contribution of $1.6 billion, slipping by 7 per cent on the pcp.
Macquarie Asset Management saw its profit fall by 5 per cent to $1 billion in the half, reflecting lower performance fees and reduced income from its aviation lessor Macquarie AirFinance.
The banking and financial services business delivered a net profit of $317 million, down 18 per cent from $385 million in the pcp, as it felt the impacts of increased credit impairment charges and margin compression on deposits. However the group reported the downfall was partly offset by strong home loan and deposits growth.
CGM was hit by dislocated markets and heightened volatility during the three months to June, with activity being subdued in the last quarter. Its profit was down by 5 per cent to $1 billion for the half.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].