Macquarie grows fee income from asset sales

03 May 2019 - 12:00 am UTC

Healthy increases in fee income and proceeds from European asset sales propelled Macquarie Group to record profits for the financial year ended 31 March 2019. 

The Australian investment bank and fund manager reported a 17% boost in net profit to AUD 2.98bn (USD 2.09bn), at an earnings briefing in Sydney on Friday (3 May). Operating income also grew 17% to AUD 12.75bn on the prior year.

So-called “annuity-style” businesses were once again a mainstay, contributing 53% to overall net profit. Macquarie Asset Management, Corporate and Asset Finance and Banking and Financial Services together contributed AUD 1.82bn of second-half net profit, up 25% on the first half of the 2019 financial year.

Fund manager Macquarie Asset Management now has AUD 542.7bn of assets under management, an increase of AUD 11% on the 2018 financial year.

Macquarie Chief Executive Shemara Wikramanayake put the fund manager’s improved performance down to Investments made by MIRA managed funds, contributions from businesses acquired in the financial year, partially offset by asset realisations. 

Fee and commission income across the group rose 18% to AUD 5.53bn for the 2019 financial year. Total performance fees earned on investments across the group stood at AUD859m for the year ended 31 March 2019, up 44% from AUD 595m in the prior year.

Macquarie Infrastructure and Real Assets – which sits within MAM – earned the lion’s share of group fee income, raking in AUD 759m in the 12 months to 31 March 2019, up 34% from AUD 567m in 2018.

Performance fee income came from funds and assets that Macquarie manages, including Macquarie European Infrastructure Fund I and III, Atlas Arteria, Macquarie Infrastructure Partners, Macquarie Global Infrastructure Fund II and Korea Macquarie Growth Fund, managed accounts and co-investment mandates.

During the year to March, MIRA raised AUD 18.9bn in new equity, including new commitments for funds and co-investments in Europe, North America, Australia and South Korea. 

The fund manager poured AUD 10.9bn into 13 acquisitions and 26 follow-on investments in infrastructure and agriculture, and earned AUD 8.7bn by divesting assets in Germany, Canada, New Zealand, Mexico, US, India and Russia.

MIRA had 25.5bn of equity available as at the end of 31 March.

MIRA will earn performance fees from the sales Brussels Airport and DCT Gdansk, a container port in Poland, announced in March. Both transactions are subject to EU merger control approvals but Wikramanayake said she is confident the transactions will go ahead. 

“As we look forward into the year we also have performance fees expected across the wider portfolio and we’ve also had terrific performance from our US funds platform where we are also realising assets,” Wikramanayake added. 

Performance fees have been around 50bps of funds under management, she added.

Macquarie now has AUD 275.5bn of its assets under management in the US, more than double that of other regions, including with AUD 108.1bn in Australia and AUD 107.5bn in Europe and AUD 60.2bn in Asia. Two-thirds of the group’s total fee income is earned outside of Australia. 

Last September, Macquarie won the right to manage The Infrastructure Fund, an AUD 2.5bn Australian asset portfolio. 
Wikramanayake predicted a weaker income from most parts of the group for the upcoming 2020 financial year, and as a result investors punished Macquarie shares sending them 5.81% lower to AUD127.84 by lunch time on Friday.  

Also marring the results was the announced departure of Tim Bishop, the head of Macquarie Capital’s investment banking division and a member of the bank’s executive committee. He will step down in May. 

London-based Daniel Wong, a co-head of the Infrastructure and Energy Group and Michael Silverton, who heads up the Americas, Europe and Asia Group from New York, will both join the executive committee. 

 

Read more