SYDNEY (Reuters) - Macquarie Group Ltd, said on Tuesday it expects net profit to rise 10 percent in the year to the end of March to a new record of about A$2.4 billion ($1.89 billion), fuelled by its asset management, proprietary investing and banking services units.
Australia’s biggest investment bank said the profit contribution from those “annuity-style businesses” in the nine months to the end of December was higher than the previous year, offsetting lower earnings from market-facing businesses.
Macquarie’s shares fell 4.4 percent in morning trade, in line with other listed asset managers as the broader market dropped 2.8 percent drop following Wall Street’s biggest decline since 2011.
“The outlook was slightly better than expected, but they are getting caught in the overall panic in markets,” said Hugh Dive, chief investment officer at Atlas Funds Management, which owns Macquarie shares.
“Macquarie should benefit from volatility and a lower Australian dollar, but risk aversion is driving all listed asset managers down.”
BT Investment Management was down 5 percent, while Platinum Investment Management was 7 percent lower.
Macquarie shares have risen sharply over the past few months, brushing off concerns around an inquiry into the scandal-hit Australian financial sector to scale a record high last week.
Macquarie makes money from M&A advisory and fees and trading commodities such as shares, currency and oil. But it also collects fees based on the performance of its global funds, which have proven to be a less volatile source of income.
About 60 percent of the Sydney-based bank’s income comes from outside Australia.
“Trading conditions across the group were satisfactory in the December 2017 quarter,” Chief Executive Officer Nicholas Moore said in a statement, adding the bank was “positioned to deliver superior performance in the medium-term,”
Group tax rate would be cut by 3-4 percent in the medium term as a result of tax reform in the United States, although no change was expected in the current financial year, the bank said.
Its effective tax rate in the United States would fall by about 25 percent from the start of fiscal 2019.
The bank’s asset management business, its biggest-earning unit, saw a 2 percent increase in assets under management as at Dec. 31 compared with three months ago.
The company, dubbed the “millionaire’s factory” due to the salaries of its most successful executives, said its A$1 billion share buyback programme remained in place but it declined to provide a specific timing for it.
Macquarie’s common equity tier 1 capital ratio as at Dec. 31 was 10.7 percent, from 11 percent at Sept. 30.
($1 = 1.2705 Australian dollars)
Reporting by Paulina Duran in Sydney. Additional reporting by Shashwat Pradhan in Bengaluru; Editing by Stephen Coates