While the banking unit within Macquarie posted rapid growth, a source of disappointment for some in the market was its green energy investments, including a $150 million impairment caused mainly by US wind farm investments.
Chief financial officer Alex Harvey, in his last results at Macquarie, said that in general terms, green energy investments had in recent years been affected by rising construction costs, higher interest rates and the fact that competition had driven down returns.
Even so, he said the fundamental investment case for green power remained strong because renewables provided a fast way of delivering electricity to meet strong demand, including from a wave of new data centres.
“Just generally, those fundamentals are still intact,” Harvey said.
“We need more power. We need to bring that power online sooner rather than later, given the push for electrification and the data consumption of data centres and so on, and what we are seeing is an accumulation of capital interested in investing in renewables,” he said.
Opal Capital chief investment officer Omkar Joshi said Macquarie’s green investments had not delivered what the market had expected. He said the $150 million in impairments on Friday were part of a wider trend.
“It’s a sector-wide phenomenon where we are seeing some of these green assets being marked down recently,” he said
Friday’s result comes after Macquarie shares had underperformed the ASX this year after regulatory woes and underwhelming earnings reports.
In its latest half, Macquarie’s bottom line benefited from higher fee income from funds management, increased revenue from mergers and acquisitions in its deal-making unit Macquarie Capital, and strong profit growth in Australian mortgages, where it has been disrupting the local market.
Wikramanayake said: “The improved underlying performance across our operating groups in the first half reflects the ongoing benefits of our diverse business mix and our continued investment in opportunities that support long-term growth and deliver positive outcomes for our clients and communities.”
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Three of its four divisions posted higher earnings: the asset management business, its banking and financial services unit, and the investment banking business Macquarie Capital all delivered growth. The exception was its commodities and global markets unit, where net profit contribution fell 15 per cent, mainly because of higher expenses.
Jarden analyst Matthew Wilson said Macquarie’s profits were 12 per cent lower than the consensus estimates from analysts. Wilson, who is “underweight” on the stock, said Macquarie was continuing to “beat up the major banks” with its offerings, and its fee income in coming financial years would also benefit from recent data centre deals involving Macquarie.
But he said it also faced challenges with compliance and regulation, in renewable energy financing, and conditions were also subdued in its commodities and global markets business.
Macquarie will pay an interim dividend of $2.80.
