Macquarie Group’s share price rallied on Tuesday following the release of a third quarter update that puts the company on track to post another record full year profit.
Fired by record revenue growth in its markets-facing businesses, the country’s largest investment bank said the three months to the end of December was the strongest quarterly performance ever posted by the group.
While the bank did not disclose specific metrics for the third quarter earnings performance, CEO Shemara Wikramanayake confirmed the unprecedented level of earnings in the December quarter.
“Improved overall market conditions have resulted in a record quarter for the group,” she said.
Macquarie enjoyed significant growth across most of its businesses during the quarter led by the commodities and global markets (CGM) division and the banking and financial services division.
The CGM division generally benefits from volatility in commodity prices, which occurred across most commodity classes during the quarter.
Wikramanayake said that commodities income was expected to be “significantly up” on the 2021 full year performance.
High client trading activity and growing contributions from the asset finance unit have also boosted income in the CGM division.
Macquarie has been the fastest growing home lender in the Australian market over the last three years and there was no sign of any loss of momentum during the quarter.
The company grew its home loan book by a stunning 8 per cent to A$82.8 billion in the three month period, while total deposits expanded by four per cent to $91.6 billion.
At its current growth rate Macquarie could overtake ANZ as the country’s fourth largest home lender by the end of the decade.
The banking division is also posting market share gains in the business lending market.
Macquarie grew its business book by four per cent in the quarter $11.4 billion.
While the outlook for the lending operations is positive, Wikramanayake noted that competitive dynamics in the mortgage market would continue to drive pressure on net interest margins.
The Macquarie Capital division continued to grow fee income in the period after advising on 126 transactions valued at $105 billion.
She indicated that transaction activity in Macquarie Capital’s advisory businesses was expected to be “significantly up” for the 12 months to the end of March.
Wikramanayke highlighted the performance of the division’s booming infrastructure advisory unit, which she indicated could be significantly expanded through future acquisitions.
Macquarie appears to be sitting on a large pile of surplus capital to fund such acquisitions.
It reported its group capital surplus at $11.5 billion at the end of December, which was more than $3 billion up on 30 September.
The CET 1 capital ratio rose to 12.2 per cent from 11.7 per cent at the end of September.
The update propelled Macquarie’s ASX-listed scrip above $200 on Tuesday morning as some investors staked positions on the prospect of a re-rating.
The share price closed up $7.55 or 4 per cent to $201.57 on above average turnover.