Macquarie’s (ASX:MQG) fiscal 2026 profit increased 30% to $4.8 billion, with a stellar second half up 93% on the first half. Every division achieved double-digit growth, driven by higher performance fees, asset sales, strong home loan growth, and increased demand for risk management products.

Why it matters: Profit beat our expectations by 14%, boosted by asset sales and volatility in energy, currency, and interest rate markets due to the Middle East conflict. With the volatility, growth across the group benefited from larger loan balances and assets under management.

  • We lift our earnings forecasts by midsingle digits over the medium term. Customer growth within the commodities and global market division lifts the base for recurring income, and cost savings in the banking and financial services division.
  • Despite Macquarie’s home loan book growing 28%, around four times faster than the market, costs were well-contained. The ability to handle higher volumes supports our upgraded forecast for the cost/income ratio for banking and financial services to fall to 49% by 2029, compared with 54% now.

The bottom line: Our fair value estimate for narrow-moat Macquarie is maintained at $205. The uplift from higher earnings forecasts is offset by an increase in our discount rate. Shares are overvalued.

  • After reassessing Macquarie’s risk profile, we now use a WACC of 6% (prior: 9.0%) to better reflect our view of the company’s business mix and cyclicality. Asset management is exposed to fee pressure, and performance fees and profits on asset sales are exposed to market conditions.
  • Macquarie is invested in a large and diverse pool of assets, and coupled with its strong track record, we expect the firm to keep making decent, above-WACC returns on investments over time. This is reflected in our midcycle return on equity forecast of 14%.

Key stats: The final dividend of $4.20 is 35% franked, taking full-year dividends to $7.00, up 8% on last year.

Macquarie Group’s diversity helps smooth earnings from lumpy and cyclical divisions

Macquarie Group is a global asset manager which spent decades branching out from its Australian investment banking roots. Asset management provides more recurring revenue streams compared with transactional based investment banking, but still carries volatility as base management fees are tied to underlying asset values--primarily fixed income, equities, and infrastructure assets.

Macquarie Asset Management is global asset manager with over $700 billion of assets under management, which dropped $250 billion after the sale of North American and European public investments to Nomura in December 2025. Specialist capabilities in infrastructure and property management set Macquarie apart from most peers and has been a key source of growth. With established capabilities and investment records, the large asset managers in the space continue to garner the bulk of inflows into the category. The United States is expected to spend trillions on infrastructure over the next decade, addressing ageing transportation, electricity, schools, and airports.

Macquarie retains a targeted approach across its investment banking business, not actively seeking to take global players head on. In the Americas and EMEA, Macquarie holds less than 2% share. Macquarie continues to leverage its global expertise and reputation in infrastructure and energy to focus on deals in these markets, with success in the smaller end of the market sometimes underserviced by larger investment banks. It is also more active in advising the private equity space.

The banking and financial services division includes a retail bank (around 7% of Australian home loans) and wealth platform. We expect Macquarie’s strategy to invest in technology to improve both the customer experience and the banks’ credit approval processes will continue to deliver above-market loan growth.

Bulls say

  • Macquarie’s position as one of the largest infrastructure asset manager globally leaves the firm well placed to benefit from underlying demand for assets and investors searching for maintainable income streams.
  • The expansion into funds management has produced more maintainable, less capital intensive, annuity-style income, which will prevent a GFC-like shock to earnings and return on equity.
  • A focus on niche segments of investment banking allows Macquarie to continue to increase earnings globally.

Bears say

  • Without the support of cash rate cuts close to zero it is unlikely Macquarie can continue to achieve as high returns in infrastructure, resulting in lower performance fee income.
  • Macquarie invests directly in unlisted assets and businesses, and despite being diversified, a large bankruptcy or asset write-down would still have an impact on group profits.
  • A large investment portfolio makes it more difficult for investors to track and identify issues early.

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