It certainly has been a positive three months for the Macquarie Group Ltd (ASX: MQG) share price.
Since dropping to a multi-year low of $70.45 in March at the height of the pandemic, the investment bank’s shares have recovered strongly.
On Thursday the Macquarie share price closed at $117.19, over 66% higher than its March low.
Why is the Macquarie share price up 66% in three months?
Investors have been buying Macquarie and the big four banks over the last few months on the belief that the economic impact of the pandemic won’t be as bad as first feared.
In addition to this, last month Macquarie released its full year results and revealed that it had a solid 12 months, all things considered.
In FY 2020, the bank reported a net profit of $2,731 million, which was down 8% on the prior corresponding period.
This reflected a high level of asset realisations in FY 2019 and higher impairments in FY 2020 because of the potential economic impacts of the pandemic. Macquarie’s credit and other impairment charges came to $1,040 million in FY 2020, up from $552 million in FY 2019.
Macquarie Group Managing Director and Chief Executive Officer, Shemara Wikramanayake, commented: “Macquarie’s full-year result has also been subject to the effects of this crisis and a strong underlying financial performance in FY20 was impacted by a material increase in credit and other impairment charges, primarily reflecting the deterioration in current and expected macroeconomic conditions as a result of COVID-19.”
Also supporting its share price was management’s positive comments about the future.
Although Ms Wikramanayake acknowledged that it was a time to be cautious, she believes Macquarie’s conservative approach to capital, funding, and liquidity positions the bank well to respond to the current environment.
She also notes that the longstanding fundamentals that have resulted in Macquarie being profitable every year since inception are unchanged.
This appears to have sparked hopes that the bank will find a way to excel in the current market. Which, considering its history, I wouldn’t bet against.
Should you invest?
While it may not be the bargain buy that it was in March, I still see value in Macquarie’s shares at the current level.
Especially for income investors that are looking for yield in this low interest rate environment. I estimate that its shares offer a partially franked 3.9% FY 2021 dividend yield.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The post The Macquarie Group share price has now soared over 66% since the market bottomed in March appeared first on Motley Fool Australia.
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