RPT-BREAKINGVIEWS-Macquarie shareholders are living in the past

By Antony Currie

MELBOURNE, Nov 7 (Reuters Breakingviews) - Macquarie's MQG.AX earnings have been coming back down to earth for more than a year. The firm's bottom line for the six months to the end of September fell 21% from the previous half-year period to just under A$1.7 billion ($1.1 billion). That equates to an anaemic annualised return on equity of 9.6%, a far cry from the high teens it often cranked out before 2023. But shareholders are treating the $51 billion Australian investment bank as if it were still in those glory days.

Granted, the financial powerhouse run by Shemara Wikramanayake is in a cyclical business. So when clients aren't as active – as just happened with Macquarie's commodities and markets unit – an equity return of around 10% is not a bad showing. Trouble is, earnings also came in some 11% below consensus sell-side estimates, per Visible Alpha data. And after 18 months of underperforming results, it's hard to shrug them off as a blip.

Moreover, analysts don't expect annual returns to breach 13% in the next two years or more. Investors have certainly reacted to the bank's issues of late. Its shares usually track those of Goldman Sachs GS.N and Morgan Stanley MS.N. But that started to change in May this year after Macquarie got into a few too many scrapes with regulators Down Under; a month later, more than 25% of shareholders voted against its executive compensation plan – a threshold which, if crossed again next year, gives owners the chance to kick out the entire board. Over the past six months, the Australian firm's stock has risen just 5%, compared with at least 25% for its U.S. peers. Friday's results prompted a more than 7% fall by mid-afternoon trading.

Yet, even that leaves Macquarie trading at more than 2 times expected book value over the next 12 months. That would be warranted if returns look set to skyrocket back up towards 20% and stay there. Of course, analysts may well be overly pessimistic about the bank's future profitability. But the evidence is mounting that its shareholders are living in the past.

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CONTEXT NEWS

Macquarie on November 7 reported earnings for the first half of its 2026 financial year of A$1.7 billion ($1.1 billion), 3% higher than the same period in 2024 but 21% lower than its performance in the six months to the end of March.

Results were lower than the consensus estimate of sell-side analysts of A$1.9 billion, per Visible Alpha. Annualised return on equity was 9.6%. Shares fell more than 7% by mid-afternoon trading.