Macquarie flags 35 per cent pandemic hit to first-half earnings

Macquarie Group has told investors the turmoil unleashed by coronavirus will see its earnings for the current half dive by 35 per cent compared to the prior first half year and said it is unable to provide meaningful guidance for the year due to the pandemic-driven uncertainty.

In an update to investors on Monday morning, Macquarie said that "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."

Macquarie Group CEO Shemara Wikramanayake said the company is currently unable to provide meaningful earnings guidance for the year.

The investment bank said the extent to which these conditions will adversely impact Macquarie's overall 2021 financial year profitability is uncertain, and it is "currently unable to provide meaningful earnings guidance for FY21."

In February, Macquarie reaffirmed guidance for its full-year profit to be "slightly" lower than last year's record earnings of almost $3 billion, but reported an 8 per cent slide in profit for the 2020 financial year to $2.7 billion in May and flagged an uncertain outlook.

For the second half ending March 31, it reported a 13 per cent slide in net profit to $1.27 billion and the group said on Monday that earnings for the current half year will be 25 per cent below this figure.

At its most recent update at the group's annual meeting in July, Macquarie said the turmoil unleashed by the coronavirus will make it tougher for the company to reap the benefits of asset sales. It highlighted challenging conditions across all of its businesses, with the banking division hit by rising provisions for bad loans and the global recession hampering deal-making.

In July, Evans and Partners analyst Matthew Wilson said he expected Macquarie's profits to fall by 25 per cent over the full year as asset sales would pause, but added that Macquarie was well placed to benefit from long-term shifts in technology, green energy and agriculture, and compared favourably to major Australian banks.

Macquarie shares dropped as much as five per cent this morning to a low of $119 after the announcement.

"We continue to maintain a cautious stance with a conservative approach to capital, funding and liquidity that positions us well to respond to the current environment," Macquarie said on Monday.

More to come

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