In a report released on 12 September, Morningstar said that Macquarie was “on track” to deliver profit for fiscal 2018 close to the forecasted $2.4 billion, pointing to “the three annuity-style business of funds management, asset financing, and banking and financial services” as major factors for its success.
“Macquarie’s core financial strengths are its earnings diversity and solid balance sheet,” the report said.
“While Macquarie’s earnings are exposed to global markets, an increasing base of annuity-style income provides a degree of earnings stability.
“These annuity-style businesses now provide the bulk of group earnings.”
Another one of the bank’s strengths was “risk management and an ability to adapt to changing market conditions,” the report said, pointing to the bank's response to the global financial crisis.
“To Macquarie’s credit, it successfully navigated the worst of the GFC relatively unscathed, free of material provisions or devastating write-downs, with no major problematic trading exposures and no material credit exposures,” the report said.
Additionally, management had “not wasted capital on expensive and ill-judged acquisitions and expansion strategies”.
“Conservative capital management, executive expertise and a dynamic, optimistic attitude are trademark Macquarie characteristics,” the report added.
However, key risks for the bank were market volatility and cyclical fluctuation as well as exposure to global markets.
“Earnings will remain volatile because of its reliance on market conditions,” the report said.
“Key risks include the performance of funds under management, asset values, loan impairments and conditions in Macquarie’s key operating markets,” as well as “the performance of the listed and unlisted specialist funds.”
Movements in global capital and equity markets would affect Macquarie’s businesses.
“A collapse in global capital markets would reduce transactional activity such as mergers and acquisitions, IPOs, capital raisings and other corporate activity,” the report said.
Nonetheless, the Morningstar report asserted that “the long-term outlook remains positive for Macquarie”.