Macquarie Bank posts $1.65 billion half-year profit as investment banking surges, but rising tech costs weigh

Macquarie said rising operating expenses across tech investments and employee wages offset strong performance for its investment banking and asset management operations as it posted half-year earnings on Friday morning.

For the six months ending September 30 the sprawling financial services group posted a net profit up three per cent to $1.65 billion on revenue up 5.8 per cent to $8.69 billion.

Operating expenses climbed five per cent to $6.24 billion as it flagged rising wage inflation and non-salary technology expenses to support its push to focus on data, digitisation and scalable growth.

“The improved underlying performance across our operating groups in the first half reflects the ongoing benefits of our diverse business mix and our continued investment in opportunities that support long-term growth and deliver positive outcomes for our clients and opportunities,” said chief executive Shemara Wikramanayake.

The global investment bank and asset manager will pay an interim dividend for the period of $2.80 per share, up 7.7 per cent on the prior corresponding half year period, but short of the market’s consensus expectations.

Its board also flagged plans to approve a $2 billion share buyback for another 12 months as it signalled a strong capital position.

Shares slide, result misses expectations

The bank’s shares fell 7.3 per cent to $201.28 on Friday afternoon as its dividend and net profit missed the market’s forecasts by around 10 per cent. Earnings per share of $4.37 for the half also missed the market’s consensus expectations by a significant 21 per cent.

UBS banking analyst John Storey said Macquarie will need to deliver a much stronger second half to its financial year ending March 31, 2026 to meet the market’s profit expectations. UBS last had a $225 valuation on shares, although this will be subject to revision after Friday’s trading update.

Mr Storey also warned the bank’s decision to reshuffle its UK-based Green Investment Bank signals a potential strategic shift in an unspecified way.

The group’s investment banking unit focused on mergers and acquisitions capital markets advisory work turned out the star performer, with its net profit up 92 per cent to $711 million, versus the prior half-year period.

Its banking and financial services unit that has pushed heavily into Australian home loan lending saw profit climb 22 per cent to $793 million.

However, total corporate expenses jumped 38 per cent to $2.14 billion to leave net operating income up 9 per cent to $4.51 billion.

The group declined to provide financial guidance for the six months to March 31 other than to say its profits are vulnerable to swings in macro-economic or geopolitical conditions.

The bank also has a number of ongoing regulatory headaches including around its decision to reimburse around 3000 Australians who invested in the collapsed Shield Master Fund via Macquarie’s Wrap Platform. In Germany it admitted around 100 current and former Macquarie staff have been designated as suspects in its regulator’s investigation into an an illegal dividend trading scheme.