Australia's Macquarie eyes possible record annual profit on energy volatility

SYDNEY (Reuters) -Australian investment bank Macquarie Group Ltd said on Tuesday that profit in the first nine months was tracking ahead of the previous year, setting the stage for a possible record annual result as it benefits from volatile energy markets.

Russia’s invasion of Ukraine and unusual weather in North America have turned Macquarie’s oil, gas and power trading unit into an earnings powerhouse, even when prices fall, because of heightened levels of trading and client risk management.

In a limited third-quarter update, Macquarie said its Commodities and Global Markets (CGM) unit, its biggest earner, produced “exceptionally strong results” in the three months to Dec. 31, even as profit from its asset management business was “substantially down” and fees in its capital management business fell amid slower dealmaking.

All up, net profit in the nine months to Dec. 31 was slightly higher than the same period a year earlier, the Sydney-listed financial firm said, without providing figures. The bank, due to report full-year results in May, booked a record profit in 2022.

Prior to the trading update, analysts had forecast an average annual profit of A$4.3 billion for the year to March 31, down from A$4.7 billion last year, according to 13 polled by Refinitiv.

UBS analysts said the update was better than expected, with the financial conglomerate benefiting from its diverse global footprint.

The company’s shares rose as much as 4% in a flat overall market, before settling 1.5% higher by mid-session.

Macquarie had benefited from volatile energy prices and supply in Europe since Russia invaded Ukraine in February 2022, and from extreme weather events in the United States, Macquarie CEO Shemara Wikramanayake said on a call with analysts.

“The bigger issue is volatility,” she said. “As long as there is movement, it benefits the CGM business.”

The trading update also demonstrated the advantage of Macquarie’s strategy of diversification across financial sectors, she said, ranging from green energy investment to public infrastructure, aircraft leasing and a retail banking arm in Australia.