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Date : 11/12/2023

Macquarie Group Ltd (ASX: MQG): A Comprehensive Analysis for 2024

As 2023 draws to a close, shares of Macquarie Group Ltd (ASX: MQG) find themselves nearly at the same level as the start of the year, hovering below $170. This brings into question the potential for 2024: could it be a more prosperous year for this ASX-listed financial entity? This article explores the various aspects of Macquarie Group’s business and its prospects for the coming year.

macquarie group shares forecast

Business Structure of Macquarie Group

Macquarie Group operates across four primary segments:

  1. Investment Banking:This segment focuses on providing advisory and capital-raising services.
  2. Retail Banking and Financial Services (BFS):This division offers banking products and services to personal clients.
  3. Asset Management (MAM):This segment manages the company’s assets.
  4. Commodities and Global Markets (CGM):This division deals with trading and hedging services.
  5. Each segment is vital to the company’s overall financial performance and future growth prospects.

Financial Performance: First Half of FY24

Earnings Recap

The first half of FY24 (HY24) was challenging for Macquarie, as its financial results reflect:

  1. Net Profit:The company reported a net profit of $1.4 billion, a decrease of 39% compared to the previous year and a 51% drop from the second half of FY23.
  2. Assets Under Management (AUM):Despite the drop in net profit, Macquarie’s AUM increased by 7% year-over-year to A$892 billion.

Profit Contributions

  1. Annuity-Style Activities:The net profit from Macquarie Asset Management, BFS, and certain CGM businesses was $1.3 billion, down 43% year-over-year.
  2. Market-Facing Activities:The net profit from Macquarie Capital and most CGM businesses was $1.56 billion, a 32% decrease from the previous year.

Share Buyback Plan

In a positive move, Macquarie announced plans to utilise part of its $10.5 billion capital surplus to conduct a share buyback of up to $2 billion. This initiative could bolster Macquarie shares.

Macquarie’s Strategic Outlook

The company is cautious, emphasising a conservative capital, funding, and liquidity approach. This strategy aims to position Macquarie effectively in the current market environment.

CEO’s Perspective

Shemara Wikramanayake, Macquarie’s CEO and Managing Director, expressed confidence in the company’s medium-term performance. She highlighted the diverse business mix, sector expertise, growth strategies, ongoing investments in technology and regulatory compliance, a strong balance sheet, and a robust risk management framework as critical drivers of future success.

Expert Analysis on Macquarie’s Share Price

UBS, a well-regarded brokerage, holds a ‘buy’ rating on Macquarie, setting a price target of $185. This target suggests a potential % capital growth of 10% over the next year. However, it’s important to note that such targets are forecasts and not guarantees.

Earnings Normalisation and Cost Challenges

UBS observes a normalisation in Macquarie’s earnings, aligning closer to FY21 levels alongside rising costs. Despite these challenges, UBS anticipates a more robust performance in the latter half of FY24.

Macroeconomic Factors and Operational Adjustments

Higher inflation, bond yields, and interest rates pose challenges, particularly for alternative asset managers. Macquarie’s response includes strategic headcount reductions, aiming to streamline operations.

Earnings Per Share Projections

UBS projects that Macquarie may generate an EPS of $7.92 in FY24 and $9.23 in FY25. Based on these estimates, the current share price of Macquarie is trading at around 21 times FY24’s earnings and 18 times FY25’s earnings.

Conclusion: Looking Ahead to 2024

As Macquarie Group Ltd navigates the complexities of the financial landscape, the company’s diversified business model, strategic initiatives, and management’s forward-looking approach position it interestingly for 2024. While the current market conditions and internal challenges are noteworthy, the company’s proactive steps and optimistic analyst forecasts suggest the potential for growth in the upcoming year. As always, investors should consider these insights in the context of their personal investment strategy and market dynamics.



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