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AUSTRALIA'S biggest investment bank Macquarie Group (ASX: MQG) has forecast a lift in profits in the first half of the 2018 financial year on the back of stronger performance fees.
Macquarie Group has forecast its full year net profit will be roughly in line with 2016-17 but expects its results in the first half of the 2018 fiscal year to September 30 will be better than the corresponding period last year and will be roughly in line with the second half of last year.
Ahead of a presentation at the CLSA Investors' Forum in Hong Kong on Tuesday and Wednesday, Macquarie Group says it is set to benefit from its performance fees and cost cutting which will help its bottom line.
The company says it will also continue to pursue its strategy of maintaining a strong balance sheet with a conservative bias while reducing its reliance on short-term wholesale funding.
In the year to March 2017, Macquarie Group posted a 7.5 per cent rise in profit to $2.22 billion, and in the first half of that year its profit was down by two per cent at $1.05 billion.
Macquarie Group says it has been successful in pursuing its strategy of diversifying its funding sources by growing its deposit base. Its total customer deposits rose by nearly 10 per cent at March 2017 to $47.8 billion, up from $43.6 billion from the previous year.
The company says all its businesses were performing in line with expectations in the first quarter as it continues to manage its risk appetite.
"The group has deep expertise in major markets and we continue to build on our strength in diversity and adapt our portfolio mix to changing market conditions," Macquarie Group CFO Patrick Upfold says in its investor presentation.
"We are seeing the ongoing benefits of continued cost initiatives, our balance sheet is strong and conservative, and we have a proven risk management framework and culture."
However, the company has warned that its positive short-term outlook could be impacted by market conditions, foreign exchange fluctuations, regulatory changes and tax uncertainties.
Chairman Peter Warne in July said the federal government's bank levy will have an estimated pre-tax annual cost of $66 million.
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