Macquarie Group Ltd., Australia’s biggest investment bank, expects its full-year earnings to rise as much as 45 percent to the highest since 2008 as the outlook for its fixed-income, currencies and commodities unit improved.
The contribution to net profit in the year to March 31 will be broadly in line or up slightly from the previous year for the FICC unit, the group said in a statement to the Australian stock exchange today. In February, Macquarie said the unit’s result would be down with the potential to be broadly in line.
Macquarie Chief Executive Officer Nicholas Moore is reaping the benefits of a cost-cutting program undertaken in the past three years. The bank is also gaining from a revival in investor appetite for riskier assets and its shift to less volatile businesses such as lending and fund management.
“Today’s presentation supports our thoughts and reflects stronger trading conditions and investor appetite,” Angus Gluskie, chief investment officer at White Funds Management, which manages $550 million including Macquarie shares, said by phone. “Conditions continue to improve and we’d expect them to favor the bank’s earnings going forward.”
Macquarie’s shares rose 2.9 percent to A$56.42 in Sydney, compared with a 0.2 percent increase for the benchmark S&P/ASX 200 Index.
A 40 to 45 percent increase in earnings would take Macquarie’s 2014 profit to between A$1.19 billion ($1.08 billion) and A$1.23 billion, the highest since a record A$1.8 billion in 2008. That compares with a profit estimate of A$1.18 billion for the full year, according to the mean from a survey of 11 analysts by Bloomberg.
“We are seeing the ongoing benefits of continued cost initiatives, our balance sheet is strong and conservative, and we have a proven risk management framework and culture,” Macquarie said in today’s statement.
The FICC unit has a growing presence in physical commodities including natural gas, power, oil, coal, base metals, iron ore, sugar and freight, Macquarie said in a presentation document. It also specializes in Asian and emerging markets, high-yield and distressed debt.
The expected profit contribution from the group’s other units is unchanged from its Feb. 11 assessment, the presentation showed.
“Markets have been more favorable over the last 12 months than they were in the previous 12 months,” said Brett Le Mesurier, a Sydney-based banking analyst at BBY Ltd., which has a “buy” rating on Macquarie. “It looks like they’ve already booked the profit” for the year.
Fund management was the biggest contributor to net profit last fiscal year, adding A$800 million in earnings, according to the presentation. Macquarie’s assets under management rose 12 percent in the three months to Dec. 31 to A$433 billion.