Macquarie's nine-month profit drops, commodities head to depart

Macquarie struggles: Macquarie Group, the Australian financial conglomerate, reported a major decline in nine-month profit on Tuesday, primarily attributed to weaknesses in its commodities and global markets division. The company also announced the departure of the division's prominent head.

The drop in profits was largely due to diminished conditions in commodities trading and global markets, following the previous year's exceptional performance triggered by geopolitical events such as Russia's invasion of Ukraine. 

Macquarie anticipates that full-year income from commodities and global markets will likely be comparable to levels seen in the previous fiscal year.

Meanwhile, CEO Shemara Wikramanayake highlighted lower fee income in Macquarie Capital, citing subdued market activity in mergers and acquisitions. 

Despite expectations of a slowdown in interest rate increases, market confidence and activity levels remained subdued, contributing to the company's challenges.

The downturn in performance also affected Macquarie's standing in the market, with its advisory market share in deals dropping significantly.

Australian M&A activity saw a notable decline in 2023, according to data from LSEG, further impacting Macquarie's performance metrics.

The departure of Nicholas O'Kane, the head of the commodities and global markets division, marks a significant change for Macquarie. O'Kane, who oversaw exceptional performance in the division, will step down to pursue opportunities outside the company. Simon Wright will assume leadership of the division, effective April 1.

Macquarie's cautious stance reflects the company's strategic approach amid challenging market conditions. Despite reporting lower profits and a subdued outlook for the remainder of the fiscal year, the company remains confident in its ability to deliver superior performance in the medium-term.

Analysts expressed disappointment over the company's performance update, with expectations of consensus downgrades to full-year earnings. However, some analysts noted Macquarie's historical tendency to surpass expectations, suggesting potential for improved performance in the future.

(With Reuters Inputs)