Macquarie feels loss of financial services fees

Macquarie Group recorded net profit for the European financial year to March’s end of $2.982 billion, up 17 per cent on FY18, with modest growth for its banking and financial services arm being offset by a loss in fee income following the realignment of its wealth business to target high net worth investors.

Its banking and financial services business’ net profit contribution of $756 million represented a three per cent increase on the year before. The improved result stemmed from growth in Australian mortgage, business banking loan, deposit and funds on platform average volumes, but was offset slightly by lower wealth management fee income associated with the above realignment.

Increased costs associated with technology to support business growth and the full-year impact of the Australian Government Bank Levy, relative to FY18, also offset growth somewhat.

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Comparatively, its asset management and corporate and asset finance arms performed poorly. Its net returns for asset management of $1.503 billion was down four per cent from FY19, while corporate and asset finance delivered a profit contribution of $1.028 billion, a 10 per cent decline on the previous year.

Macquarie pinned the drop in asset management profit to a decrease in invested-related and other income, as well as higher operating costs. The decrease in corporate and asset finance was due to the impact of reduced provisions and impairments the year before and one-off investment-related income in FY18.

Its commodities and global markets arm contributed a net profit contribution of $1.505 billion, up 65 per cent on FY18, while Macquarie Capital recorded impressive growth of 89 per cent in profits from FY18 to hit $1.353 billion.

At the same time as announcing the results, the bank announced that Macquarie Capital’s group head would be stepping down from both that role and the executive committee at the end of the month. He would step in as chair of Macquarie Capital to assist with the transition, with Daniel Wong and Michael Silverton stepping up as group co-heads. Both already held executive positions within Macquarie Group.

Speaking on the results, Macquarie Group managing director and chief executive, Shemara Wikramanayake, said: “FY19 demonstrated the continued benefits of our diverse business mix. Our annuity-style businesses had a solid, steady year while our markets-facing businesses delivered strong performance in favourable market conditions”.

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