Australia | Nov 11 2025
This story features MACQUARIE GROUP LIMITED.
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The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS
Macquarie Group posted a first half miss, sparking a sell-off, but green asset write-downs were mostly to blame and FY26 guidance has been retained.
-Macquarie Group’s first half misses by -10%
-Green asset write-downs the main culprit, FY26 guidance retained
-Significant performance fees ahead
-When the end for the operational soft patch?
By Greg Peel
Macquarie Group’s ((MQG)) first half FY26 earnings missed consensus by around -10%, as did the interim dividend, leading to a -6% selldown of the shares on the day.
Brokers are nonetheless circumspect, citing a number of moving parts within the result, and noting full year guidance has been retained.
It’s Not Easy Being Green
The miss was to a great extent due to -$150m in write-downs of the book value of the Cero solar energy and Corio wind energy businesses, leaving the two valued at $900m and $300m respectively, and prior year gains of $300m for green assets not being repeated.
Cero and Corio have been moved from under the Macquarie Asset Management (MAM) banner into Macquarie Corporate as a prelude to a (hopefully) rapid divestment, although Ord Minnett suggests whether those book values can be realised in the sale process remains an open question.
On the reasons behind the move of existing green assets (on balance sheet) into Corporate, management said this was to allow MAM to fully focus on developing its green assets fiduciary capabilities.
The write-downs and movement of assets resulted in a -$2.13bn loss for the Corporate division, which was 38% greater than the loss posted in the first half FY25.
Morgan Stanley suggests the transfer implies that MAM spent -$440m in FY25 on green asset development costs.
Costly Investment
Outside of Corporate, Commodities & Global Markets (CGM) had the softest first half divisional result, with its net profit contribution down -15% year on year, some -18% below consensus.
While CGM’s operating income was broadly in-line with the prior year, the result ‘miss’ was driven by higher operating expenses (-$200m) related to: 1) increased investment in CGM’s core platform; 2) remediation-related spend, and 3) significant transaction-related costs.
Morgans notes while some of these costs will plateau near term, management did say elevated platform investment spend is expected to run for a couple of years. This reflects Macquarie’s aim to build scalability and synergy across the CGM platform, which is needed to support its global ambitions.
Revenue in the commodities segment of the CGM division also proved harder to come by, Ord Minnett points out, as more players entered the US and European oil and gas trading market, although growth in the financial markets business provided some buffer against the commodities segment slowdown.
This is a disappointing CGM result, Morgan Stanley says, given softer income on higher capital consumed. Timing of asset finance platform costs step-up and commodities income recognition should see a better second half.
Fee Performance
The key positive from the result was the strong MAM performance fee outcome, which was underpinned by the sale of the AirTrunk data centre assets and the divestment of Korean industrial gas producer DIG Airgas in the period.
Ord Minnett notes the more recent sale of the Aligned Data Centre assets to a consortium of infrastructure investors will generate performance fees in the next few years, and the accounting and timing recognition options for these could provide a buffer against revenue weakness in other segments of the group.
The agreed divestment of MAM funds’ stake in Aligned Data Centers goes a long way to underwriting the next three or so years of performance fees, Jarden suggests.
Morgan Stanley agrees performance fees from MAM funds in Aligned should start in the second half and support earnings for several years.
However, Jarden was surprised to see some already recognised in the first half.
Other Businesses
Macquarie Bank reported an increase in its loan portfolio of circa 11%, most of which came from home loans, funded by deposit growth of circa 12%.
As with its larger retail sector peers in Australia, its net interest margin was squeezed by competition in the home loan segment, Ord Minnett notes.
Banking & Financial Services (BFS) continues to motor along nicely, Jarden suggests, “beating up” the major banks.
Macquarie Capital’s profit, up 91% year on year, benefitted from higher investment related income (up $164m) due to growth in Macquarie’s Private Credit portfolio (and higher repayment income), and also increased M&A fee and commission income.
Public markets’ assets under management of $543bn was down -2% half on half, with net outflows and forex movements more than offsetting positive markets, Jarden notes.
The previously announced sale of US/Euro public markets to Nomura (settlement due in the fourth quarter) should remove around -$285bn assets under management and -$100m of earnings, which will impact in FY27, but with a $400m gain on sale in FY26.
Private markets markets’ assets under management of $417bn, was up 7% half on half, with real estate up 15% and infrastructure equity 7%, supported by positive markets and new inflows $10.7bn.
Jarden notes recycling capital out of public markets is expected to drive better growth from private assets, across industries of core expertise, with $23.5bn of equity to deploy.
Looking Ahead
The fact that full year expectations were largely reiterated by management suggest a 40/60 skew versus a usual 45/55. Typical CGM seasonality will assist, Citi notes, as will the gain on sale from the public markets business and non-repetition of the green assets’ impairments.
Despite the near-term challenges, Citi believes there remain considerable opportunities into the medium term. Data centre performance fees should be material, but timing will be difficult to predict due to fund asset sales. Green assets may see a more pragmatic resolution, and surplus capital will be released from the public markets sale.
The most difficult to predict, Citi suggests, are the potential benefits from reinvesting into CGM, with competition a threat to realising an appropriate return on investment.
Citi suggests earnings visibility is potentially improving in outer years, but the near term remains opaque, and hence sticks with a Neutral rating on a PE of some 20x. Citi retains a $200 target.
Morgan Stanley is looking for 9.5% FY26 profit growth and a stronger pick up in FY27 to circa 14% growth. All else equal, adding the sale of North American and EU public markets businesses to Nomura would add just over 5% to FY26 profit but remove -3% of FY27 earnings.
If the strong capital market recovery is sustained (the fourth quarter FY25 saw M&A up 74% year on year) this would present upside risk to Morgan Stanley’s forecasts. But equally, commodities and green energy assets present potential headwinds.
After several misstarts, this broker thinks investors need concrete evidence of Macquarie delivering growth.
Morgan Stanley expects the cost of supporting green assets to fall away by end of FY27, but doesn’t bake in any gains on realising green assets. The broker has retained an Equal-weight rating, cutting its target to $216 from $226.
Morgans sees Macquarie as a quality franchise, well exposed to structural growth areas like Infrastructure and green energy. However, trading on an elevated PE, and with earnings momentum patchier in recent periods, Morgans believes the stock is currently fair value, hence a Hold recommendation. Morgans’ target falls to $215.70 from $222.87.
More positively, Ord Minnett maintains a target price of $255.00. The recent share price slide leads this broker to upgrade its recommendation to Buy from Accumulate.
As noted, Jarden believes BFS continues to motor along nicely. Further, MAM has now found a base to grow from as it deploys the Nomura proceeds gradually into private markets.
CGM still requires platform build investment, Jarden notes, along with remediation and a more volatile commodities complex Macquarie Capital had a good half and the pipeline for capital market activity looks robust.
Jarden upgrades its rating to Overweight from Underweight, seeing, in contrast to others, a better risk-reward trade-off at the current PE.
“We might be a tad early,” Jarden admits. “Global markets do look very richly priced…”
UBS (Neutral, $225 target) comments Macquarie is a quality compounder but currently in a soft patch. There is no panic yet from stakeholders, but this broker think it’s concerning times for Macquarie management and the Board with profitability (RoTE) now at multi-decade lows at circa 10%, well below targeted levels.
Were this situation to persist, UBS is anticipating a potential strategic reshuffle around group structure and assets to counter the shares trading at a discount to their sum-of-the-parts.
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