The Macquarie Group Ltd (ASX: MQG) share price is under the spotlight after it revealed a record third quarter to December 2021.
Macquarie is Australia’s largest investment bank with operations across areas like asset management, banking and financing.
Macquarie’s record quarter
The Macquarie share price will be in focus after telling the market that it generated a record amount of profit for a 3-month period in the December 2021 quarter.
It said that improved overall market conditions in the December quarter, which is the third quarter of its financial year, helped the result.
Macquarie splits its operations into two types – ‘annuity style’ and ‘markets-facing’. Annuity business profits are more dependable and consistent, Market-facing can be variable and it depends on what’s going on in the overall global economy.
The amount of profit made can be a very important driver of the Macquarie share price.
Annuity-style
The annuity-style Macquarie Asset Management (MAM) and banking and financial services (BFS) businesses saw combined quarterly net profit fall due to the timing of performance fees and investment-related income. But for the nine months to 31 December 2021, net profit was up thanks to the growth of the volume of BFS activities.
MAM finished the quarter with A$750.1 billion of assets under management (AUM) at 31 December 2021, up 2% over three months. The BFS loan portfolio grew 8% over three months to $82.8 billion.
Markets-facing
Quarterly profit from the commodities and global markets (CGM) and Macquarie Capital businesses was up “substantially”. For the nine months to December 2021, net profit is also up strongly.
Macquarie attributed the booming result to higher principal income from Macquarie Capital, including exceptionally strong investment realisations in the sectors of infrastructure (including green energy), business services and technology. CGM also saw strong commodities income.
Financial position
Banks are required by the regulators to hold a certain amount of money/capital compared to the size of their loan book. One key measurement is the common equity tier 1 (CET1) capital ratio – Macquarie’s was 12.2% at December 2021, comfortably more than APRA’s requirement.
My thoughts on this quarter and the Macquarie share price
It seems that FY22 is going to be another strong year for the investment bank. I think that Macquarie is one of the best ASX shares within the ASX 20, with diversified and quality earnings. The company can grow in whichever segment it wants to, and can invest almost anywhere in the world as well.
I’m not sure if it’s a buy today for the short-term, but I think it is a solid business for the long-term. It also has an attractive combination of paying dividends and re-investing profit for growth too.
