(Adds CEO comments on outlook at analyst call, Nuix)
By Paulina Duran
SYDNEY, Nov 6 (Reuters) - Australian financial conglomerate Macquarie Group Ltd MQG.AX on Friday said first-half net profit dropped 32% due to delayed deals and a rise in impairment charges that led to the first-ever loss in its investment banking unit.
The country's largest investment bank and asset manager said market conditions would remain challenging due to the COVID-19 pandemic, though at A$985 million ($715.41 million), its first-half profit beat the 35% drop it forecast in September. arm Macquarie Capital swung to its first loss of A$189 million as lower merger-and-acquisition (M&A) fees and lower sales gains were unable to offset almost doubled impairment charges.
The pandemic-induced economic slowdown hurt sales of proprietary investments and asset sales of its funds, while a slump in global M&A activity and business from key clients such as U.S. private equity funds also pushed fees lower.
Macquarie's share price rose 2% after the earnings release versus the benchmark index's .AXJO 0.8% rise, amid high volatility as markets await the result of the U.S. presidential election.
Deterioration in economic conditions also weighed on credit and other impairment charges, which climbed to A$447 million from A$139 million a year earlier.
OUTLOOK
The Sydney-based firm slashed its interim dividend to A$1.35 per share from A$2.50 year prior and said market conditions were likely to remain challenging for every unit. It refrained from providing any overall guidance for fiscal 2021.
It said it would see significantly lower performance fees in asset managing, more provisions for loan losses in its banking unit, and "significantly lower" earnings in its commodities and markets business on subdued trading activity.
Earnings at Macquarie Capital would also likely fall as the "realisation of gains of investments could be deferred," Chief Executive Officer Shemara Wikramanayake said at a briefing.
PLAY THE HAND THAT'S DEALT
The company is heavily invested in real assets such as infrastructure and renewable energy projects that are set to increase in value as central banks keep near-zero interest rates for years to come, automatically pushing asset prices higher.
It also had A$9 billion in surplus capital for investments.
"We respond to every environment and play the hand that's dealt," Wikramanayake said. "We are heading down into a world where we are going to end with much higher levels of fiscal debt and there are many opportunities that would come out of that for us."
Macquarie is expected to soon list partly owned software analytics firm Nuix Pty Ltd IPO-NUI.AX , Reuters previously reported. Analysts expect the initial public offering (IPO) could be a big windfall for the company.
Asked about the listing, Wikramanayake declined to comment on the IPO but said no single deal from Macquarie's A$3.4 billion proprietary investment book was likely to be big enough to reverse the lower guidance it has for its Macquarie Capital unit. ($1 = 1.3768 Australian dollars)