The Macquarie Group Ltd (ASX: MQG) share price is on watch today after giving investors an update regarding its HY22 progress.
The global investment bank said that it’s expecting the FY22 first half profit to be slightly down on the FY21 second half profit, despite a solid FY22 first quarter.
It mentioned that the FY22 first half includes the Macquarie Infrastructure Corporation (MIC) disposition fee in Macquarie Asset Management.
As part of its presentation to investors, Macquarie said it has seen strong capital deployment over an extended period, with $3.8 billion growth in capital requirements across all four operating groups since September 2020. Its operating groups are continuing to seek opportunities to deploy additional capital, provided the projected risk-adjusted returns are attractive for shareholders.
To give it the additional flexibility to support business growth, the board decided to reduce its annual dividend payout policy range to 50% to 70%.
For Macquarie Asset Management (MAM), excluding the Waddell & Reed acquisition, it’s expecting base management fees to be broadly in line with last year. Net other operating income is expected to be slightly down because of significant one-off items in FY21. The Waddell & Reed acquisition isn’t expected to add to earnings because of integration and one-off costs.
In its banking division, it’s seeing ongoing growth of its loan portfolio, but competition is pressuring its margins.
Macquarie Capital is expected to see increased transaction activity in FY22. There’s also an improved outlook for investment realisations and increased balance sheet deployment. Investment-related income is expected to be “significantly up” on FY21.
In the commodities and global markets business, commodities income is expected to be down after a strong FY21, though volatility may create opportunities. There is also the sale of the UK commercial and industrial smart meter portfolio. The commodities and global markets division is doing better than expected.
In the medium-term, Macquarie said that it remains well positioned to deliver superior performance in the medium-term with a strong and conservative balance sheet. Macquarie also has an ongoing program to identify cost saving initiatives and efficiencies.
Summary thoughts about Macquarie and the share price
As I mentioned yesterday, I reckon Macquarie is the best ASX bank to own for the long-term compared to ones like Commonwealth Bank of Australia (ASX: CBA). However, short-term volatility for both the Macquarie share price and profit is possible.
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