Byron Kaye and Samir Manekar
SYDNEY (Reuters) – Leading Australian investment bank Macquarie Group (OTC:) said its annual profit fell by a third, its steepest decline in 15 years, as stabilizing energy markets hit its commodities trading unit. less money by selling clean energy assets.
Friday’s result came after years of huge profits from the financial giant’s commodities division, which benefited from unusually volatile European energy markets following Russia’s invasion of Ukraine and increased demand for oil and gas in North America.
Profits at the Sydney company’s main source of income fell 47 per cent for the year ended March 31. Along with what the company said was a decision to retain clean energy assets in its broader portfolio, the commodities division saw its overall profit drop 32% to $3.5 billion.
The company cut its final dividend to A$3.85 per share from A$4.50 a year earlier.
“Obviously, from an execution perspective, it was a more challenging situation,” CFO Alex Harvey said on a call with analysts, referring to the sale of green energy assets.
Macquarie shares fell 2% compared with a 0.6% rise in the broader market as analysts flagged a sharper-than-expected decline in its commodities division, but the overall result was in line with forecasts.
“The online headlines show a direct result, although the quality appears unsatisfactory,” Jarden analysts wrote in a note to a client.
The company did not give specific earnings guidance but said it expects commodity earnings to be “broadly in line” with its 2024 result in the near term, as well as higher investment returns from green investments.
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For Macquarie, “FY24 was a down year and activity should recover in FY25,” Jefferies analysts said in a note.
While Macquarie’s commodities business contributed almost half of its profit, the bank said it boosted profits from its Australian retail banking unit, which contributed about a fifth of total profit. The division originated mortgages faster than the broader market and now accounts for 5.3% of the country’s total mortgage origination of A$2 trillion.
Macquarie Capital’s investment banking and advisory arm, which accounts for about a sixth of profits, increased profits by 31% thanks to growth in its private loan portfolio.
The decline in revenues was reflected in lower wages at the company, which was nicknamed the “millionaire factory.”
Chief executive Shemara Wikramanayake, the highest paid employee, was paid A$25 million for the year, down from A$33 million the previous year due to a reduction in profit sharing, according to Macquarie’s annual report, which was also released on Friday.
Macquarie’s former head of commodities and global markets Nick O’Kane, previously the company’s highest paid employee, was paid A$1 million for the year, up from A$57 million the previous year, after leaving the company in March without paying the amount the time required to receive your share of the profit for the year.
($1 = 1.5228 Australian dollars)