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Macquarie Group, banks in focus for reporting

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Macquarie Group (AU: MQG) is scheduled to give an operational update on Tuesday 8 February. Shares are up 42% in the past 12 months. In late October, it bolstered its near-term outlook after posting a record profit and said it planned to raise at least $1.5 billion to step up green energy related investments. The country’s largest asset manager and world’s largest infrastructure investor, according to Reuters, more than doubled its first half profit to $2.04 billion, boosted by a global power crunch that roiled commodity markets.

Chief executive Shemara Wikramanayake flagged an increased focus on green investment, announcing that Macquarie’s Green Investment Group (GIG), which it acquired from the British government in 2017, would be moved from its investment unit into its funds management business to better capture investor appetite. The company recorded double-digit growth in all its four businesses in the first half, including a local bank and its commodities and global markets unit, which saw a 60% rise in profit. Net profit at its banking and financial services unit grew 52% to $482 million, driven by 14% growth in home lending.

Morgan Stanley's Andrei Stadnik last week trimmed his target price on Macquarie Group by 4% to $235, while reiterating his Overweight rating.

"We expect a flat to positive December quarter update at Macquarie's operational briefing," he said in a note to clients. "Private markets and commodities have been particular strong."

"We trim our valuation and address higher rates, but remain Overweight given structural tailwinds in private markets, infrastructure and green energy."

Shares traded 1% up to an intraday high of $194.70 on Monday, with the consensus at a 12-month price target at $206.37, according to the Investing.com average analyst report. Seven out of 12 analysts there have an Outperform recommendation on the stock, one has a Sell and four rate Macquarie Group at Neutral.

Investors could be in for a shock this earnings season as markets further underestimate the financial blow dealt by omicron in the first half of financial 2022, and the persistence of cost pressures, Morgan Stanley has warned.

With 19% of the local bourse by market capitalisation reporting this week, the broker is expecting to see growing evidence of pandemic-inflicted disruptions, supply chain friction and labour shortages. While these issues present clear obstacles to growth, Morgan Stanley cautioned that their duration and severity have not been fully priced into forecast earnings, which could see some companies severely punished.

This week the focus will be on financial services companies on the ASX as earnings season builds in Australia. Commonwealth Bank is scheduled to report half-year results on Wednesday 9 February. National Australia Bank will provide a trading update on Thursday 10 February.

In its quarterly update released on Monday, banking group ANZ said it was considering increasing the size of the current on-market buy-back. It reported softer trading conditions in October for its markets business, which will likely impact its first-half performance.

The S&P/ASX 200 was down as much as 0.4% through the morning, with US futures falling. But news from Prime Minister Scott Morrison that Australia for the first time in two years would reopen to double vaccinated international visitors on February 21 lifted the ASX 200 to close flat.

Hamish Douglass will step down as the chairman of Magellan Financial Group and be replaced by REA Group chairman Hamish McLennan. Mr Douglass, who founded Magellan with Chris Mackay in 2006, requested a period of medical leave to prioritise his health, the company said on Monday. Mr Mackay, who has run the ASX-listed MFF Capital Investments since 2013, will return to Magellan to oversee the global equity retail fund and institutional mandates. Shares were down more than 12% at one point on Monday at $16.14. Magellan shares have fallen more than 13.5% since the start of the year – and more than 62% in the past 12 months. They traded above $70 in 2020.

Australian retail sales soared to a record 8.2% in the fourth quarter, according to Australian Bureau of Statistics data, underpinning a robust rebound in the economy.

Mainland China markets jumped 2% at the start of trade after returning from the Lunar New Year holiday. Japan's Nikkei is down and the Hang Seng is lower. New Zealand is closed for a public holiday.

The Aussie dollar is stronger at US71.87c against the US dollar.

Bitcoin is gaining, at $US42 748.

Gold is lower, at $US1810.00 an ounce.

Brent crude oil is steady, around $US94.05 a barrel.

WTI crude oil is down slightly, at $US92.31 a barrel.

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