The Macquarie Group Ltd (ASX: MQG) share price has dropped approximately 4%, meaning the bank just fell to a nine-week low.
The business is seeing a decline, as is the wider ASX share market. The S&P/ASX 200 Index (ASX: XJO) is currently down around 1%. ASX shares are following on from the decline that the international share market saw on Friday.
What’s impacting the Macquarie share price?
The investment bank is becoming increasingly global. In FY22, international income was 75% of total income.
It reported that FY22 net profit after tax (NPAT) was $4.7 billion. That represented an increase of 56% year on year.
The FY22 second-half profit of $2.66 billion was 30% higher than the first half of FY22 and up 31% compared to the second half of FY21.
It also said that its assets under management (AUM) increased by 37% to $774.8 billion over the year.
Macquarie’s financial position “comfortably exceeds regulatory minimum requirements” with $10.7 billion of surplus capital. The bank’s common equity tier 1 (CET) ratio was 11.5%.
The investment bank said that it continues to maintain a cautious stance, with a conservative approach to capital, funding and liquidity which will help it respond to the current environment.
Macquarie CEO Shemara Wikramanayake said:
Macquarie remains well-positioned to deliver superior performance in the medium term. This is due to our deep expertise in major markets, strength in business and geographic diversity and ability to adapt the portfolio mix to changing market conditions, an ongoing program to identify cost saving initiatives and efficiency, a strong and conservative balance sheet, and a proven risk management framework and culture.
Is the Macquarie share price an opportunity?
The market is very mixed on the business.
Morgan Stanley says it’s a buy, with a price target of $245. That implies a possible upside of more than 30%. It thinks that Macquarie is placed well to do well from the flow of capital into green opportunities. The broker thinks that Macquarie can continue to do well in the current environment.
Another broker that’s positive on the business is Morgans, with a buy rating and a price target of $215. That’s a possible upside of around 20% over the next year.
Citi is one of the brokers that is neutral on the Macquarie share price, with a price target of $187, implying a slight upside. It thinks that earnings generated by Macquarie’s commodity division will settle down, likely impacting profits in the next few years.
But there’s one broker that is fairly negative. Credit Suisse rates Macquarie as ‘underperform’. It thinks the FY22 result is the best that profit is going to be. The rising interest rate environment could be a negative for the global investment bank, potentially hurting asset values.
On Credit Suisse’s numbers, the Macquarie share price has a valuation of 18x FY23’s estimated earnings.
However, Morgan Stanley’s more optimistic outlook puts Macquarie shares at 17x FY23’s estimated earnings.
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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