Australia's Macquarie warns of softer FY20 after record profit

SYDNEY (Reuters) - Australian investment bank Macquarie Group Ltd on Friday warned of a weaker year ahead, as it reported record earnings of A$2.98 billion ($2.1 billion) driven by asset sales and double-digit profit from its trading and investments units.

FILE PHOTO: The logo of Macquarie Group Ltd adorns the main entrance to their Sydney office headquarters in Australia, October 28, 2016. REUTERS/David Gray

The Sydney-based bank and global investor said earnings in 2020 would be “slightly down”, sending its shares as much as 7 percent lower for their sharpest intraday fall since November 2016.

The commodities and markets and capital divisions were the main contributors in the year to March 31, helping Macquarie beat its own earnings guidance with a 16.6 percent rise in annual net profit. Earnings from its asset management, banking and financing businesses shrank.

“We’ve had a very strong year in our market-facing businesses,” Chief Executive Officer Shemara Wikramanayake told analysts, on her first annual earnings call since taking the job in November with a promise of faster profit growth.

Net profit rose to A$2.98 billion ($2.1 billion) from A$2.56 billion a year earlier. Analysts on average had estimated a profit of A$2.95 billion, Refinitiv data shows.

Profit at its markets-facing business leapt 76 percent to A$2.86 billion, the firm said.

Favorable conditions were unlikely to be repeated this fiscal year, Wikramanayake added, without elaborating.

While the strong result reinforced the 50-year-old company’s push to strengthen its global position under Wikramanayake, investors’ profit expectations for this year now needed to drop by 7 percent, UBS analysts said in a note to clients.

“This will clearly disappoint investors,” Citigroup banking analyst Brendan Sproules said.

Macquarie shares fell as much as 7 percent, before recovering to be 5.4 percent lower in the afternoon, while the broader market was slightly higher.

Profit from the core annuity-style businesses — which include its A$360 billion funds management unit, and its leasing, banking and finance arms — fell 4 percent. The bank reported A$8 billion in net outflows, driven by withdrawals in equity funds and the winding down of one of its hedge funds.

During the fiscal year the firm bought European real estate investment group GLL and Luxembourg-based ValueInvest Asset Management. It sold stakes in energy company Quadrant Energy and online real estate settlements firm PEXA.

Macquarie had A$6.1 billion in surplus capital at the end of March which would help its global growth plans and provide flexibility should M&A opportunities occur, Wikramanayake said.

A possible change of government in Australia, where the opposition Labor Party is leading opinion polls ahead of a general election set for May 18, would have no impact on the bank, she added.

Macquarie declared a final dividend of A$3.60 per share, up from A$3.20 last year.

Reporting by Paulina Duran in Sydney. Additional reporting by Rushil Dutta and Niyati Shetty in Bengaluru; Editing by Stephen Coates