Renowned investment bank Macquarie Group Ltd [ASX:MQG] is flying today.
The $66 billion share price is trading 4.82% higher at time of writing, climbing on the back of some impressive forecasts for the company’s interim result (to September).
Let’s dig into the good news shared by management…
Profits up year-on-year, but down slightly on last interim result
So the catalyst for today’s investor euphoria is due to Macquarie’s comment that profits for 1H22 will be only ‘slightly down’ from 2H21. Meaning the result should be close to the $2.03 billion reported six months ago.
The reason investors are welcoming this news so receptively is due to some outliers though.
As Macquarie note themselves, 1H22 saw some incredibly favourable market conditions. Including an extremely strong result from their Commodities and Global Markets branches, which are somewhat outliers.
Therefore, the fact that Macquarie is close to the same level of profitability this half is a testament to the growth across its whole operations, particularly as the Delta strain of COVID continues to spread some uncertainty.
Plus, compared to 1H21, their net profit will have doubled year-on-year.
Showcasing just how well the bank has performed over the past 12 months.
This is particularly important when taking into consideration Macquarie’s recent decision to lower dividend payments. A move that management has justified by freeing up capital for other opportunities amidst the economic recovery from COVID.
Meaning that this bank is clearly positioning itself for medium- to long-term returns over short-term payouts. Something that may polarise investors but is extremely logical from a cyclical perspective.
As Macquarie outlines in its medium-term outlook:
- ‘Macquarie remains well-positioned to deliver superior performance in the medium term.
- ‘Deep expertise in major markets.
- ‘Build on our strength in business and geographic diversity and continue to adapt our portfolio mix to changing market conditions.’
For these reasons, investors certainly have good reason to be pleased with today’s update.
What’s next for the Macquarie Share Price?
Looking ahead, it is clear that the bank is preparing for the expected global economic recovery. Albeit, with some slight concern as to how much risk Delta presents.
As such, it seems management is in a strong position to continue its solid history of profitability — leveraging trends and booms across a wide variety of industries and sectors.
All while ensuring they have robust risk strategies in place.
For long-term investors, it seems like the perfect position.
But for investors looking to rely on income, it may not be quite so pleasing. After all, like I mentioned, Macquarie has cut its dividend payouts in order to free up its capital. Meaning investors seeking strong yields may be better off looking elsewhere.
Fortunately, we can help with that.
Our dividend stock report includes five of the best yield picks from across the ASX. Stocks that are bound to please even the staunchest income investor. So make sure you check out this free report for yourself, right here.
For The Rum Rebellion
PS: The Rum Rebellion is a fantastic place to start your investment journey. We talk about the big trends driving the Australian Economy. Learn all about it here.