Macquarie Group's 1Q27 performance was broadly in line with expectations, but 2Q27 needs to strengthen materially; Goldman Sachs maintains its Sell rating

Overview

This report reviews Goldman Sachs' assessment of Macquarie Group's 1Q27 AGM trading update. The company provided only a qualitative update, and Goldman Sachs estimates 1Q27 NPAT at approximately A$0.9bn. Overall group performance was in line with expectations, but 2Q27 needs to improve materially to meet VA consensus expectations for 1H27. The report also emphasizes that the management transition may mark MQG's shift from a value-harvesting phase to a capital-redeployment phase.

Core views

Goldman Sachs maintains a cautious view: MQG's near-term revenue and earnings growth may slow, with revenue forecasts 1%-4% below VA consensus and earnings forecasts 5%-9% below VA consensus over the next three years. The key grounds for the Sell rating include a more challenging global economic and operating environment, several one-off items and a stronger Australian dollar weighing on revenue, the potential impact of private credit quality on MacCap earnings, and the need to redeploy capital from announced asset sales into businesses offering attractive returns to replace lost earnings.

Analysis framework

The report combines analysis of segment operating performance, comparison with consensus expectations, and assessment of capital recycling and business transformation. Goldman Sachs evaluates NPC trends for MAM, BFS, CGM, and MacCap individually and assesses which revenue sources need to improve in 2Q27 to meet 1H27 expectations. For valuation, the 12-month target price is composed equally of SOTP valuation and a relative P/E approach.

Methodology notes

• Valuation methodsSOTP valuation

  Sum-of-the-parts valuation

  50% of the target price is based on SOTP valuation of the individual business segments, using a Gordon Growth framework applied to sustainable ROE, resulting in A$219.61.

• Valuation methodsRelative P/E approach

  Relative P/E valuation

  50% of the target price is based on a market-derived relative P/E approach, resulting in A$221.99.

• factor_analysisGS Factor Profile

  Goldman Sachs factor profile

  Goldman Sachs compares stock characteristics across growth, financial returns, valuation multiples, and composite factors against the market and industry peers.

• corporate_activityM&A Rank

  M&A probability score

  Goldman Sachs assesses the probability of a company becoming an acquisition target using qualitative and quantitative factors and ranks it from 1 to 3; a score of 1 represents high probability and 3 represents low probability.

• financial_databaseQuantum

  Goldman Sachs proprietary financial database

  Quantum provides historical financial statements, forecasts, and ratios for in-depth single-company analysis and cross-industry and cross-market comparisons.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Macquarie Group (MQG.AX)

  Covered company and primary investment target

  Strengths

  Diversified business model spanning capital markets, long-term direct investment, asset management, retail banking, and wealth management; CGM benefits from improved trading in natural gas and power markets; asset realizations can still provide earnings support.

  Weaknesses

  Near-term earnings growth may slow, MAM is affected by business disposals, BFS margins are pressured by competition and portfolio changes, and MacCap advisory fees are below the strong prior-year period.

  Comparison

  MacCap's advisory fee performance diverges from the recent surge in advisory revenue at large U.S. investment banks, reflecting MQG's greater exposure to mid-market transactions, while U.S. peers benefit from large-scale deal activity.

  Risks

  A slower-than-expected global macroeconomic recovery, deterioration in private credit asset quality, weaker-than-expected capital redeployment, and failure of 2Q27 to deliver the improvement required to meet consensus.

Key data

• Estimated 1Q27 NPATApproximately A$0.9bnEstimated by Goldman Sachs based on the AGM qualitative trading update.
• 12-month target priceA$220.75Unchanged.
• RatingSellSell rating maintained.
• MAM performanceNPC declined year over yearPrimarily reflects the structural impact of the public investments business sale; performance fees remained modest in the first quarter.
• BFS performanceNPC increased year over yearDriven by growth in scale, partly offset by lower margins.
• CGM performanceNPC increased sharply year over yearMainly driven by improved trading activity in the North American natural gas and power markets.
• MacCap private credit portfolioA$27.2bnBroadly unchanged from the March 2026 update, indicating that concerns in private credit markets may slow portfolio deployment and growth.
• Revenue forecast relative to consensus1%-4% below VA consensusGoldman Sachs' forecast for the next three years.
• Earnings forecast relative to consensus5%-9% below VA consensusGoldman Sachs' forecast for the next three years.

Impact & implications

The report suggests that near-term upside in MQG's share price requires clearer improvement in operating conditions or upside surprises from one-off realizations. 2Q27 is the key validation window. The sale of Macquarie Air Finance could help, but advisory fees, performance fees, equity realizations, and commodities trading revenue must also improve concurrently. Following the management transition, the ability to redeploy capital released from asset sales into value-accretive acquisitions and high-return businesses will determine the medium-term growth path.

Risks

• A global economic slowdown and a more challenging operating environment could pressure revenue and earnings growth.
• A stronger Australian dollar and several one-off items could negatively affect revenue.
• Volatility in private credit markets could affect MacCap's asset quality and earnings.
• Following announced asset sales, insufficient speed or returns from capital redeployment could make it difficult to replace lost earnings.
• If advisory fees, performance fees, equity realizations, and commodities trading revenue do not improve sufficiently in 2Q27, 1H27 consensus expectations could face downward-revision risk.

What to watch

• Whether 2Q27 is materially stronger than 1Q27 and sufficient to support 1H27 consensus expectations.
• The earnings and capital impact of completing the Macquarie Air Finance sale in FY27.
• Whether the group's strategy shifts from value harvesting to effective capital redeployment after incoming CEO Greg Ward takes over.
• The recovery of MAM performance fees and changes in the earnings base following the divestment of asset management businesses.
• The sustainability of CGM revenue from natural gas, power, and commodities trading.
• The quality of growth in MacCap advisory fees, equity realizations, and the private credit portfolio.