Macquarie Group Ltd., Australia’s biggest investment bank, reported its biggest full-year profit since 2008 as trading and fund-management revenue increased. Its shares rose to a six-year high.
Net income for the year ended March 31 rose 49 percent to A$1.27 billion ($1.17 billion), the Sydney-based firm said in a statement today. That beat the gain of as much as 45 percent the firm forecast on March 24 and compared with profit of A$851 million a year earlier.
“It is a pretty solid result from Macquarie,” Christopher Hall, who helps manage about $4.4 billion including Macquarie shares as senior investment officer at Adelaide-based Argo Investments Ltd., said by phone today. “The key is the guidance. While Macquarie says it’d be broadly in line, the market is expecting it to be higher.”
Macquarie is benefiting from a revival in financial market activity and a return of risk appetite. Chief Executive Officer Nicholas Moore has also focused on less volatile businesses such as lending and fund management to offset the cyclical nature of its investment banking and trading businesses. Funds under management at Macquarie climbed 23 percent from a year ago to A$427 billion.
The bank’s shares climbed 0.9 percent to A$58.70 in Sydney, the highest close since May 2008. The stock has risen 6.8 percent this year, more than triple the benchmark S&P/ASX 200 index’s 2 percent gain.
Macquarie’s profit in the six months ended March 31 climbed 52 percent to A$764 million, led by a 97 percent gain at its advisory and trading businesses. The mean estimate of six analysts was for a profit of A$719 million, according to a Bloomberg survey.
The bank said improved profit contributions from its units in fiscal 2015 will be offset by the lack of a one-time gain in fiscal 2014 from the disposal of its stake in Sydney Airport. Macquarie booked a gain of A$228 million in the second half of fiscal 2014 from the sale.
The bank may post net profit of A$1.36 billion in the year to March 2015, according to the mean estimate from a survey of 12 analysts by Bloomberg.
The bank expects its securities and investment-banking unit to report higher earnings in fiscal 2015 along with its banking and financial services unit. Profit at its funds unit, corporate and leasing business and fixed-income, currencies and commodities division will be “broadly in line” with 2014, it said.
“Global market conditions continued to improve in fiscal 2014, contributing to a significant increase in Macquarie Group’s operating income and profit, with all of Macquarie’s operating groups delivering increased net profit contributions,” Moore said in today’s statement.
The bank declared a dividend of A$1.60 compared with A$1.25 a year earlier.
The company’s higher earnings follow a 56 percent advance in first-quarter net income for Morgan Stanley and a 10 percent drop for Goldman Sachs Group Inc. reported April. 17. Japan’s Nomura Holdings Inc. said April 30 its net income for the year ended March 31 climbed 99 percent.
Profit from fund management contributed the most to Macquarie Group’s earnings, rising 39 percent to A$1.05 billion from a year earlier. Macquarie is seeing investor interest in infrastructure with governments looking to sell assets while clients in Japan, China and South Korea are examining cross-border opportunities, Moore said in an interview today.
Its fixed income, currencies and commodities unit recorded a 29 percent increase driven by hedging, “strong” customer flow and trading in U.S. gas, power and global oil, it said.
Macquarie Securities, the bank’s stock-trading business, reported a net profit of A$107 million compared with a A$50 million loss for the previous year. Its corporate and asset finance business had a 19 percent increase in profit.
Macquarie Capital reported an 87 percent increase in profit. The division advises on mergers and acquisitions, and capital-raising activities such as initial public offerings.
Income from its business in the Americas, largely the U.S., overtook its home market of Australia and contributed 35 percent of total income. It earned 68 percent of its revenue from outside Australia in 2014.
The bank, which added 250 employees in the year to 13,913, had a 15 percent increase in operating expenses. It held A$2.7 billion in surplus capital as of March 31.
The biggest drivers of the full-year results were a 26 percent increase in interest and trading income, a 14 percent rise in fees and commissions and a 46 percent increase in other operating income and charges, which included the gain on the Sydney Airport stake and reduced impairment on equity investments, Macquarie said.
“The underlying drivers, be it financial markets activity, IPO or M&A volumes, are heading in the right direction for Macquarie,” Angus Gluskie, managing director at White Funds Management in Sydney, who oversees about $550 million including Macquarie shares, said before the earnings report. “Macquarie should ideally reap the benefits of its cost cuts if markets continue to remain strong.”