Macquarie profit hits $3.7b as compliance concerns surface

Asset manager Macquarie Group (ASX: MQG) has extended its streak of “unbroken profitability”, with growth across most divisions driving a five per cent year-on-year rise in full-year profit to $3.7 billion.

Higher performance fees and the sale of a helicopter leasing business saw Macquarie Asset Management (MAM) deliver a net profit of $1.61 billion, reflecting a 33 per cent jump from the $1.20 billion result in FY24.

The banking and financial services arm contributed $1.38 billion, up 11 per cent from $1.24 billion, which was mainly due to increased loans and deposits and lower costs from a reduced staff headcount. This was partly offset by smaller profit margins, more bad debt charges and fewer car loans.

Commodities and Global Markets (CGM) saw net profit drop by 12 per cent from $3.21 billion to $2.83 billion, mainly due to lower client hedging activity and reduced trading in certain commodity markets. This was partly offset by stronger performance in financial markets, especially in structured foreign exchange, and increased earnings from the equities business.

Most income came from international segments, with the Americas accounting for 32 per cent, followed by EMEA (24 per cent), Asia (10 per cent), and Australia contributing 34 per cent of the total.

Net operating income came in at $17.2 billion, reflecting a small two per cent rise, while operating expenses landed at $12 billion, broadly in line with FY24.

“Against a backdrop of ongoing market and economic uncertainty, Macquarie’s client franchises remained resilient over the past year, delivering new business origination and underlying income growth, contributing to our history of unbroken profitability,” Macquarie group managing director and CEO Shemara Wikramanayake said.

Two weeks ago, Macquarie offloaded its North American and European public asset management segment to Tokyo-based Nomura in a $2.8 billion all-cash deal that covered $285 billion in assets. The deal is expected to be finalised before the end of the 2025 calendar year.

In the meantime, the asset manager has turned its attention to the nation’s corporate regulator, which announced two days ago that it has imposed additional conditions on Macquarie Bank’s financial services licence after finding multiple compliance failures, one of which went on for a decade. The failures relate to Macquarie’s futures dealing business and its reporting of over-the-counter (OTC) derivatives trades.

The Australian Securities and Investments Commission (ASIC) said it identified nine areas of concern in Macquarie’s derivatives division over the last 18 months, which included the misreporting of more than 375,000 OTC transactions and two futures dealing matters.

As a result, Macquarie will be required to develop a remediation plan to address the issues and their root causes, with an independent expert reviewing whether the plan is adequate. They will also assess how effectively Macquarie's actions can prevent, detect and respond to similar problems in the future.

In a letter to shareholders, Wikramanayake said the company’s four operating segments “possess deep expertise” and are able to “focus on major markets benefitting from long-term growth drivers.”

“They are supported by our culture and disciplined approach to risk management, strong and conservatively managed balance sheet, and flexible approach to capital allocation that maximises growth opportunities and returns for shareholders,” she said.