Macquarie First-Half Profit Slumps on Bad-Debt Provisions

(Bloomberg) -- Macquarie Group Ltd. first-half profit fell to the lowest in six years amid the uncertain recovery from the coronavirus pandemic.

Net income dropped 32% to A$985 million ($718 million) in the six months ended Sept. 30, the Sydney-based bank said Friday. That’s slightly better than the 35% decline the bank forecast in September. Credit and impairment charges rose to A$447 million due to the deterioration of economic conditions caused by the pandemic, the bank said.

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Macquarie said it was unable to provide an earnings forecast for the rest of the year. “Market conditions are likely to remain challenging, especially given the significant and unprecedented uncertainty caused by the worldwide impact of Covid-19 and the uncertain speed of the global economic recovery,” it said in a statement.

The profit plunge comes as Australia’s largest investment bank and infrastructure manager navigates a prolonged global downturn amid a resurgence of the coronavirus. In Europe, where Macquarie gets more than a quarter of its revenue, the U.K. has re-entered a lockdown, while governments from Italy to Greece have announced new curbs to stop travel and to limit the spread of the virus.

Macquarie’s markets-facing units, which account for about a third of earnings, bore the brunt of the profit drop, slumping 42% from a year earlier to A$672 million. Macquarie Capital recorded a A$189 million loss as the pandemic caused “significantly lower” income from equity investments and lower fees from reduced M&A activity. Credit provisions increased due to a “small number” of underperforming loans.

Profit in the annuity-style businesses slipped 7% to A$1.6 billion. A drop in asset management performance fees, lower income from plane leasing and an increase in impairments offset the sale of the air finance and European rail businesses. Banking and financial services profit was impacted by higher impairment charges and a lift in employee and technology costs.

Macquarie shares rose as much as 2.9% in early Sydney trading. The stock has surged almost 90% from the lows reached in March.

The bank will pay a first-half dividend of A$1.35 per share, down from A$2.50 a year ago.

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