SYDNEY -Macquarie Group on Friday reported its lowest half-year profit in three years as costs rose and it paused green asset sales, but it said its performance would pick up in the second half and it had enough excess capital to buy back shares.

The first-half results were a rare miss for the Australian firm, which prides itself on a global breadth stretching from retail banking to offshore wind and commodity trading. The Sydney-based financial conglomerate has not had a steeper first-half profit drop in more than a decade.

Macquarie had already trimmed its earnings forecasts twice since its record fiscal 2023 results announced in May, but the 39% fall in net profit to A$1.42 billion ($913.49 million) for the half ended Sept. 30 was well below a consensus estimate of A$1.77 billion compiled by Citi.

The company's shares fell as much as 3% in early trading before regaining ground to trade more than 1% higher after an investor earnings call.

The A$892 billion asset management division led the earnings decline, with profits down 71% to A$407 million as costs rose and Macquarie paused green asset sales after a series of big deals last year due to turmoil in renewable energy markets and the need to seed a new fund.

Chief Executive Shemara Wikramanayake told investors Macquarie expected to sell the assets in time without major discounts and to sidestep the problems facing other operators sandwiched between fixed-price contracts agreed in 2020 and 2021 and the subsequent inflation surge.

"Our portfolio we feel comfortable is very different to the situations where these large write-offs have been announced recently," she said on the earnings call.

"These are operating assets with big (power purchase agreements) earning money and we're seeing interest in them."

Macquarie said the asset management division's income should rebound in the second half to about the A$940 million it reported in the same period last year when it booked asset sales.

The other big decline came in the heavyweight commodities and global markets segment, where profits fell 31% to A$1.4 billion as a degree of normalcy returned to energy markets after the chaos last year unleashed by Russia's invasion of Ukraine and turbulent weather in North America.

Despite the weaker result, the company's board approved an on-market share buyback of up to A$2 billion and declared an interim dividend of A$2.55 per share, citing its ability to return excess capital to investors.

UBS said in a note the results would lead markets to further cut earnings forecasts.

"The only silver lining, in our view, is the buyback, which might indicate Macquarie view the stock as undervalued," UBS said.

The company said fees and commissions at investment banking arm Macquarie Capital were in line with the previous comparable period. Profit fell 28% to A$430 million.

The division guided to full-year transaction activity in line with the prior financial year.

Earnings in the banking and financial services division, home to Australia's fifth-largest retail mortgage business, were a rare bright spot and rose 10% to A$638 million on the back of loan growth and stronger margins.

  - Reuters