Why is the Macquarie (MQG) share price in the spotlight?

Posted: 1 November 2021 10:33 am

Shares in the investment banking giant have risen 46% in the last 12 months.

Macquarie Group (ASX: MQG) shares are in focus on Friday despite the stock being currently in a trading halt. That's not surprising, given that the stock has jumped 46% over the last year, a performance that is comparable to those of the Big Four banks.

Why are investors focused on the Macquarie stock price?

The buzz in the stock comes after the asset management and investment banking giant reported a better than expected $2.04 billion profit for the 6 months ended 30 September.

This was more than double the $985 million it had posted for the same period last year, and was also ahead of the group’s earnings guidance for the first half profit to be “slightly down” on the $2.03 billion it delivered for the 6 months to 31 March.

Its commodities and global markets division was the biggest contributor, posting an eye-popping 60% jump in net profit to $1.73 billion, thanks to higher commodities revenue and a partial sale in its UK portfolio. The asset management unit saw its profit rise 23%.

The key investment banking arm Macquarie Capital swung to a $468 million profit from a $189 million loss a year ago. Similarly, the banking and finance division’s net profit contribution jumped 52% as Macquarie made inroads in the home and business loans market.

Investors will also be cheering the group’s interim dividend payout of $2.72 per share, double from last year’s first-half payment of $1.35 a share.

Capital raising

The financial conglomerate also announced it will raise $1.5 billion, largely through a share placement to institutional investors, to pursue acquisition opportunities. Hence the trading halt in the stock on Friday.

“Having deployed $5.5 billion of capital over the second half of 2021 and first half of 2022, we continue to see a strong pipeline of opportunities,” CEO Shemara Wikramanayake said in a statement to the ASX.

“Raising new capital provides us with additional flexibility to invest in new opportunities where the expected risk-adjusted returns are attractive to our shareholders, while maintaining an appropriate capital surplus,” she added.

The offer price will be determined by a bookbuild on Friday, although Macquarie said it would start at $190 a share, a 4% discount on Thursday’s closing price of $197.83.

The fund raising comes in the same week that Macquarie shares crossed $200 each for the first time, hitting a peak of $202.50 on Wednesday.

Macquarie has also announced a share purchase plan for retail investors, with its size to be determined by demand from eligible shareholders.

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