Macquarie Group Ltd. said weak trading conditions in the first quarter will mean profit is “substantially down” from the same period last year, sending its shares lower.
The stock dropped as much as 5.2% in Sydney Thursday, the most since June 2022. The Australian investment bank and asset manager also noted its markets business has seen a weaker quarter relative to the strong results from the same quarter last year, according to a statement. Fee revenue at Macquarie Capital was also down due to subdued activity levels.
“We had much weaker trading conditions in the first quarter,” Chief Executive Officer Shemara Wikramanayake said on a call Thursday. Looking forward, “we continue to maintain a cautious stance, with a conservative approach to capital and funding.”
Analysts were expecting a slowdown in the firm’s commodities and global markets business after last year’s blockbuster result helped offset a downturn in dealmaking. Macquarie indicated the fragility of the world economy and geopolitical events may impact the short-term outlook.
Downgrades to earnings expectations will likely follow as the overall outlook “remains uncertain,” said UBS Group AG analyst John Storey. “Divisional commentary reads worse than expected,” he said.
Macquarie Asset Management had A$864 billion ($584 billion) in assets under management as of the end of June, broadly in line with the level at the end of March, the statement said. During the quarter, A$2.1 billion was raised in new equity in its private markets unit. Meantime, reduced trading activity across gas and power drove lower expectations for its global markets business.
What Bloomberg Intelligence Says
“Macquarie’s weaker 1Q is consistent with expectations for growing headwinds after a record result in 2023. A$10.8 billion excess capital is likely to be deployed to further M&A in higher returning Macquarie Asset Management.” — Matt Ingram, senior industry analyst at Bloomberg Intelligence
Read More: Macquarie Outlook Remains Weaker Due to Volumes, Big 2023
--With assistance from Georgina McKay.
(Updates share price from first paragraph)