Abu Dhabi, UAEMonday 25 May 2020

Macquarie Group’s net income drops 8% as coronavirus bites

Impairments rose to $666.7m, almost doubling from last year

Macquarie's range of operating activities, from infrastructure management to aircraft leasing, oil trading and retail banking, offers both more diversification and sources of risk. Reuters
Macquarie's range of operating activities, from infrastructure management to aircraft leasing, oil trading and retail banking, offers both more diversification and sources of risk. Reuters

Macquarie Group slashed its dividend as the global economic shutdown sent impairments soaring, ending a seven-year run of profit growth at the Australian investment bank and infrastructure manager.

Chief executive Shemara Wikramanayake also refrained from the bank’s usual practice of providing an earnings outlook, saying the uncertainty caused by the virus leaves the bank “unable to provide any meaningful” guidance for this year.

Net income fell 8 per cent to $1.8 billion (Dh6.6bn) in the 12 months ended on March 31, Sydney-based Macquarie said on Friday, its first profit drop in eight years. Impairments rose to $666.7 million, almost doubling from $368m last year.

Australia’s commercial banks have endured a torrid earnings season, with Westpac Banking and Australia & New Zealand Banking Group both deferring dividend payments.

“The result is decent given the tough environment,” Aberdeen Standard Investments investment manager Jason Kururangi said. “They are well positioned - as much as they can be - for a tougher period ahead.”

Ms Wikramanayake also struck a more positive note on a call with analysts, stressing there is still decent client activity. “Deals are still happening,” she said.

“Ideally, we like to do things face-to-face but we are still able to get on with making investments,” Ms Wikramanayake said in an interview. Citing changes such as virtual data rooms, operating remotely for a couple of months “hasn’t been a material disruption,” she said.

“We are comfortable with Macquarie and believe they are well positioned for opportunities in the future,” said Max Cappetta, chief executive of Redpoint Investment Management which manages about $6.7bn.

“Obviously the Covid crisis is challenging on a number of fronts, however management has consistently demonstrated strong governance and long-term thinking. That’s one of the reasons we have favoured our position in Macquarie over other banks in the last few years.”

Macquarie is the latest global bank to report sharply higher impairments as lenders grapple with assessing the impact of the virus.

Its global footprint and range of operating activities, from infrastructure management to aircraft leasing, oil trading and retail banking, offers both more diversification and sources of risk.

Bad-debt provisions rose in all divisions.

Updated: May 8, 2020 06:30 PM

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