Macquarie Group Ltd. expects earnings from its asset management unit will be higher in the year ending March, helped by a weaker Australian dollar and higher performance fees.
The Sydney-based investment bank and asset manager, which received 68 percent of its revenue from outside Australia, is benefiting from a 10 percent drop in the local currency this year. It still predicts total earnings will be higher than the previous year, according to a regulatory filing Thursday.
Macquarie’s profit growth is driven by its expansion into fund management, lending and leasing as part of a plan to reduce reliance on advisory and trading. The market-based businesses are also reaping the benefits of increased volatility and stronger customer appetite for risk.
“At this stage, markets are conducive to their business lines and should support growth across the group,” said Angus Gluskie, managing director at White Funds Management Pty in Sydney, who oversees $550 million including Macquarie shares. “Macquarie’s comments that performance fees are rising and a weaker Australian dollar reinforce investor views for the stock.”
Macquarie is forecast to post full-year net income of A$1.8 billion ($1.3 billion), according to the mean estimate of 13 analysts surveyed by Bloomberg before Thursday’s announcement. That compares with A$1.6 billion reported for the year ended March 31.
Macquarie shares climbed 1.7 percent to A$85.87 at 10:49 a.m. in Sydney and were on course for the highest close since October 2007. The benchmark S&P/ASX 200 index fell 0.3 percent. Macquarie has jumped 47 percent this year.
After posting its highest net income in seven years in the year ended March, Macquarie had said it expected flat earnings growth at its asset management, corporate lending and leasing, and commodities and currencies businesses in fiscal 2016. The firm saw its advisory and underwriting, equity trading, and banking operations posting higher earnings.
The asset management unit earned A$208 million in performance fees in the three months to June 30, compared with A$580 million for all of last year, filings show. The business, which managed A$477 billion at the end of June, contributed 35 percent of Macquarie’s profit last year.
Equity trading benefited from recent market volatility, particularly in Asia and China. Macquarie said it was involved either as an adviser or underwriter in 119 transactions valued at A$82 billion. Market fluctuations also drove its commodities business, it said.
Macquarie had surplus capital of A$2.4 billion as of June, which Chief Executive Officer Nicholas Moore said was sufficient to meet expected growth.
“In terms of normal organic growth, the capital we have available in the group should support us,” Moore said in a media call before the annual shareholders meeting. “But in terms of any significant one-off acquisitions, we would expect that to be reflected with capital being raised at that time.”