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Macquarie’s shares fell 7 per cent on Friday after the Australian financial group reported lower than expected half-year earnings, driven by weak performance in its once-booming commodities division and a writedown on some of its green investments.
The Sydney-based company reported net profit rose 3 per cent year on year to A$1.7bn (US$1.1bn) in the six months to September, compared with analyst estimates of A$1.8bn compiled by Bloomberg.
Its retail banking, asset management and mergers and acquisitions advisory arms recorded strong results. But a weak performance in its commodities and global markets division, which trades oil, gas and metals and organises financing, dented confidence in the company’s ability to hit full-year profit targets.
Commodities trading once contributed as much as 51 per cent to Macquarie’s overall profits and produced pay packages that led the Australian group to be dubbed the “millionaires factory”.
Shares fell to about A$202 on Friday, their lowest level since May, as profits and a first-half dividend of A$2.80 a share missed analyst expectations.
Macquarie, one of the world’s largest investors in renewable energy projects, booked a A$152mn impairment charge on its green assets, with most of the writedown related to offshore wind investments in the US, where the cost of capital and deployment has increased.
John Storey, an analyst with UBS, said the writedown raised “strategic questions” about Macquarie’s future in renewable investment and suggested the company was “throwing in the towel on these assets” or that its asset management unit was “getting primed for something bigger”.
During a media call, Shemara Wikramanayake, chief executive of Macquarie, denied the company was looking to give up on its A$30bn of green assets and that it was still deploying capital across wind, batteries and solar.
She added that Macquarie had moved the assets to its corporate unit to focus “more attention by bringing them to the centre” and that it did not feel any pressure to sell.
Alex Harvey, the outgoing chief financial officer, said the writedowns did not represent a broader downturn in the value of renewable energy assets.
Macquarie’s commodities and global markets unit drove outsized returns two years ago as volatility in the energy markets, triggered by Russia’s full-scale invasion of Ukraine, boosted oil prices.
The company on Friday said a more sedate trading environment, combined with “remediation” related to regulatory action weighed on performance.
The division’s weakness overshadowed a stronger performance in other parts of the business, including in Australian retail banking, investment banking and asset management where it has sealed the disposal of two large data centre companies in the past year.
Macquarie has also overhauled its risk and compliance culture after a string of penalties and investigations by Australian, UK and US regulators over governance failures in the past year.