Why Macquarie’s result impressed even its big supporters

The smaller member of the market facing businesses duo, Macquarie Capital certainly punched above its weight over the past nine months thanks to strong gains on selling investments (particularly in infrastructure) and principal trading.

Both these market facing divisions can experience lumpier revenues, but both found themselves in a purple patch.

The second bucket of Macquarie divisions is what it labels its annuity-style businesses. This is dominated by Macquarie Asset Management with its smaller stablemate being Banking and Financial Services.

Together these businesses produced less in the quarter compared with the same quarter last year but for the year to date are ahead of the previous corresponding period.

But the hero division inside this annuities bucket is the Banking and Financial Services – which produced an impressive 8 per cent growth in mortgage lending and increased its business lending by 4 per cent.

Macquarie reckons the world needs to build $1 trillion in infrastructure by 2040 – and it will be looking for a share of the pie.

Wikramanayake cautioned that its mortgage business was susceptible to the competition in the market that is placing pressure on interest rate margins. But the good news is that Macquarie took a deliberate decision not to chase customers by using the ultra-low fixed rate loans last year. The banks that did are facing the hangover of additional squeeze on their net interest margins this year.

Whether the positive earnings across the group are enough for a re-rating of its share price remains to be seen.

While over the past year, Macquarie’s share price has gained 51 per cent, it’s fallen by 4.6 per since January which some explain as the result of being dragged down in line with US peers like JP Morgan and Goldman Sachs.

But there is a strong argument to suggest that Macquarie is a different beast.

It is well known for an entrepreneurial culture that its US peers and the Australian trading banks do not possess.

Its investment horizons go out decades, it rewards its people based on performance and strongly aligns remuneration with shareholder returns.

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This has marked the group as being ahead of the pack on picking future trends.

The Hills Motorway infrastructure play happened in the early 1990s, and it was a trailblazer in recognising renewables.

Renewable energy, urbanisation, population growth and digitisation are all investment themes scattered among divisional commentary for years.

There is no doubt that given the nature of Macquarie, some years will be better than others but long-term growth has been shown to be part of the group’s DNA.

Macquarie reckons the world needs to build $1 trillion in infrastructure by 2040 – and it will be looking for a share of the pie.

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