Macquarie Drops 5% Despite Profit Beat and Higher Dividend: Time to Buy the Dip?

Macquarie Group (ASX: MQG) saw its share price drop 5% on Friday, surprising many investors. The investment bank delivered a solid result on paper, with profit up 3% to $1.66 billion, a 7.7% increase in the dividend to $2.80 per share, and a $2 billion share buyback extended for another year. Yet the market wasn’t impressed, and shares dropped more than 5% to around $206 by day’s end.

Why the drop? Macquarie’s profit was lower than what analysts had expected, and it also fell 21% compared to the previous half-year. This raised concerns that the company’s growth might be slowing. With the share price now well below its recent high, investors are asking: is this a buying opportunity on a quality business, or are the market’s concerns about slowing growth justified?

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Why Macquarie Fell Despite Beating Last Year’s Profit

The market wasn’t comparing this result to a year ago; it was measuring Macquarie against much more recent performance, and the numbers told a worrying story.

Profit dropped 21% compared to the second half of FY2025, which was an exceptionally strong six months. That sharp sequential decline raised immediate questions about sustainability. When a company steps backwards after posting strong results, investors naturally wonder if the peak has passed.

Operating expenses climbed 5% to $6.24 billion, driven by higher employment costs, technology spending, and remediation expenses. While investing for growth is important, rising costs that outpace revenue growth eat into margins.

Most concerning was Commodities and Global Markets (CGM), Macquarie’s historically strong division, which delivered a profit of $1.11 billion, down 15% from last year. This weakness signals that favourable commodities trading conditions have cooled significantly.

Banking Growth and Asset Management Strength Signal Long-Term Quality

Despite the headline disappointment, two divisions delivered exceptional results that suggest Macquarie’s underlying business remains healthy.

Banking captures market share: Banking and Financial Services delivered profit of $793 million, up 22%. The division’s mortgage portfolio surged to $160.3 billion, up 13% in just six months, showing Macquarie is successfully winning business from the big four banks. Deposit growth remained robust, building a stable funding base for future lending.

Asset management shines: Macquarie Asset Management posted profit of $1.18 billion, up 43%, driven by higher performance fees. These are high-margin earnings that provide more stability than volatile trading businesses. With $959.1 billion in assets under management, MAM offers a predictable foundation for long-term growth.

Balance sheet remains fortress-like: The company holds a capital surplus of $7.6 billion with a CET1 ratio of 12.4%, well above regulatory requirements. This provides both a safety buffer and flexibility to pursue growth while maintaining dividends.

Should You Buy Macquarie at $206? The Risk-Reward Assessment

With shares down 15% from recent highs, the valuation question becomes critical.

For income investors: The interim dividend of $2.80 (35% franked) brings the trailing full-year payout to approximately $6.70 per share, yielding around 3.2% at current prices. Not spectacular, but solid when combined with franking credits and backed by a strong balance sheet.

For growth investors: The opportunity hinges on two factors: whether CGM stabilises and whether Banking momentum continues. The company’s return on equity has slipped from 11.2% to 9.6%, meaning it’s generating lower returns on shareholder capital, an efficiency loss worth monitoring.

Key risks:

• CGM weakness could persist if commodities remain subdued
• Banking margin compression as competition intensifies
• Rising operating expenses are pressuring profitability

The verdict

At $206, Macquarie sits in neutral territory, not a screaming buy, but not one to panic sell. For defensive investors, the 3.2% yield backed by a fortress balance sheet offers reasonable value. For growth investors, the case depends on CGM recovery and Banking momentum. Conservative investors might wait for sub-$200 levels, while those with multi-year horizons could view this as an opportunity to accumulate a quality business with diverse earnings streams trading 15% below recent highs.