Macquarie’s (ASX.MQG) fiscal 2027 first-quarter profit increased for most divisions. The update accompanied news that CEO Shemara Wikramanayake will step down in November after almost eight years in the role. Her replacement, Greg Ward, led impressive growth of the banking and financial services division.

Why it matters: The trading update is high-level, but largely as expected. Positive momentum in funds under management, home loan and deposit growth, and buoyant activity in energy, currency, and interest rate markets as the Middle East conflict keeps volatility high.

  • The only change to the short-term outlook commentary is home loan growth being subject to market conditions, due to uncertainty around budget changes. After 6% growth in the first quarter, we don’t expect market share gains to slow unless competition leads to untenable discounting.
  • Ms Wikramanayake hands Macquarie over in good shape. All divisions are performing well, and the balance sheet is sound. Even the share price is near record highs. We don’t expect Greg Ward will want to shake things up; he is well acquainted with Macquarie’s workings, having been CFO and deputy MD.

The bottom line: Shares are at a large premium to our unchanged fair value estimate of $205. Narrow-moat Macquarie trades on a forward P/E of 20 times and dividend yield of 3.5%. We don’t think the margin of safety is adequate for a business exposed to asset price swings and market volatility.

  • Macquarie is invested in a large and diverse pool of assets, and, coupled with its strong track record, we expect the firm to continue delivering decent, above-WACC returns on its investments over time. This is reflected in our midcycle ROE forecast of 13%.
  • We forecast EPS growth to average 5% over the next five years, with modest growth in fiscal 2027, in contrast to recent periods that benefited from heightened volatility in energy markets and Macquarie’s several large asset sales.

Macquarie Group’s Diversity Helps Smooth Earnings From Lumpy and Cyclical Divisions

Macquarie Group is a global asset manager that spent decades branching out from its Australian investment banking roots. Asset management provides more recurring revenue streams compared with transaction-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 a 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 have 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 aging 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 a 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 bank’s credit approval processes to continue to deliver above-market loan growth.

Bulls Say

  • Macquarie’s position as one of the largest infrastructure asset managers 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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