Macquarie shares dive as CEO warns of ‘persistent’ inflation

Macquarie chief executive Shemara Wikramanayake has warned high inflation is here to stay and urged caution as markets brace for ongoing volatility, after the investment powerhouse reported soaring full-year profits that beat market expectations.

Macquarie’s share price fell 7.59 per cent on Friday to $187.28 per share, more than three times the ASX200, after investors were spooked by dramatic falls in US markets caused by uncertain economic conditions and persistently high inflation.

The market reaction came despite Macquarie delivering another set of strong full-year results, including headline profits of $4.7 billion for the 12 months to March 31, up 56 per cent over the year.

Macquarie’s total funds under management swelled 37 per cent over the year to $774.8 billion. The record results beat market consensus by more than 6 per cent, described by UBS as “very strong” and Citi as a “surprise record profit” in the asset management business.

Macquarie is a global investor with 48 per cent of its income now coming from the Americas, compared to 25 per cent from Australia. Wikramanayake said there were no plans to move Macquarie’s headquarters to the US because the company’s owners were still mostly Australian, after questions from reporters.

Wikramanayake said macroeconomic conditions were “particularly hard to call” but the group was prepared for a range of scenarios, ranging from a mild contraction to global recession.

“At the moment, they’re particularly hard to call because we’re seeing a resurgence in global growth. We’re seeing inflation pick up. There was a view it was transitory, some of it is now proving to be persistent. Central banks are responding,” she said.

“We don’t know whether we could have a situation where they really tighten very strongly and have a slowdown in global economies or where they pull back and we have stagflation.”

But she said Macquarie was diversified and could benefit in any setting, with $10.7 billion in surplus capital ready to deploy if asset prices fall. “Macroeconomic situations are not a good or a bad, every business is affected differently. Macquarie really isn’t a bet on a macroeconomic situation,” she said.