Fee boost gets Macquarie off to strong start

Macquarie Group has signalled it expects profit growth for the first half as it affirmed full-year earnings are on track to come close to another record performance.

Shares in the Sydney-based investment bank rose strongly on Monday, closing 3 per cent higher at $85.15, after Macquarie pointed to “stronger performance fees” than it had expected for its first half.

In a market presentation from chief financial officer Patrick Upfold, the bank said its result for the six months ending in September would be higher than a year earlier, and “broadly” in line with the $1.16 billion it made in the six months ending March.

For the full year to March 2018, the bank repeated previous guidance that it expected a result “broadly in line” with the $2.2 billion record profit of last year.

Although the bank did not change its full-year guidance, investors were buoyed by the commentary, which comes after its share price had fallen in recent days amid fears its US interests might be hit by Hurricane Irma.

Head of banking research at Morningstar, David Ellis, said he interpreted Monday’s “broadly in line” comment as a sign full-year results would exceed last year’s performance.

“I think the market is probably going from ‘broadly in line’ meaning flat, to ‘broadly in line’ meaning closer to plus-10 per cent,” Mr Ellis said.

Macquarie’s outlook included the standard caveat that its profits were subject to market conditions, foreign exchange moves and regulatory uncertainty.

The bank’s bottom line has been boosted by performance fees collected by its asset management business amid strong global interest in infrastructure assets – an area where it is a world leader.

“It’s benefiting from the global demand for sustainable long-term yield, particularly from the big pension funds and sovereign wealth funds,” Mr Ellis said.

“Large institutional investors are looking for good income in infrastructure and real assets.”

Mr Ellis is forecasting Macquarie’s profits will come close to $2.37 billion for the year, which would be a new record for the bank.

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