Macquarie Group (ASX: MQG) — Investment Research Report

3-Year / 5-Year Price Scenarios

Base EPS: $12.77 — FY2026 basic EPS of A$12.77 from the annual report. Scenario growth is a normalized earnings assumption, not a forecast of any particular transaction or market year.

0. Information Richness & AI Limitations

Grade A (information richness). Macquarie publishes detailed audited annual and interim reports, segment disclosures, capital ratios and governance material. The official results index at Macquarie Investor Relations listed the FY2026 annual report and 1H26 interim report by the 2026-07-31 cutoff. AI research confidence is high on reported figures and business description, but investment certainty is lower because a large portion of earnings remains market-sensitive and transaction-dependent.

1. Data & Cross-Validation

Market snapshot (2026-07-31): A$253.76 from the ASX company header; ASX market capitalisation A$95.91B. Using 377.99M diluted shares, price x shares equals A$95.91B, reconciling within rounding. The 52-week range is approximately A$179-A$266; trailing EPS is A$12.77 and the trailing P/E is approximately 19.9x. The ASX header is an independent live-market source; the report price is not a model estimate.

Primary financial evidence (AUD): FY2026 annual report: net operating income A$19.477B, profit attributable to ordinary equity holders A$4.847B, basic EPS A$12.77 and total FY2026 dividends A$7.00 per share. The 1H26 interim report: net operating income A$8.691B, attributable profit A$1.655B and basic EPS A$4.367; the directors declared an interim dividend of A$2.80. FY2026 profit increased 30% year over year and the annual report states total assets of A$540.1B and total equity of A$36.9B at 2026-03-31.

Cross-check and limitation: the official annual and interim PDFs are the primary source for reported financials; ASX header is the primary market-data cross-check. Macquarie's net operating income is used as the revenue-like operating measure because this is a financial group. Peer multiples are secondary context and can be stale; scenarios therefore use explicit ranges rather than a precise broker consensus.

2. Business Essence — Duan Yongping

One line: Macquarie allocates capital and provides specialist financial services across asset management, banking, advisory, commodities and global markets, earning recurring fees plus cyclical risk-taking returns.

MAM and BFS provide more recurring earnings through management fees, lending and deposits; CGM and Macquarie Capital add valuable specialist capabilities but are more sensitive to market volumes, commodity prices, deal flow and realizations. Client trust, regulatory permissions and institutional relationships create repeat business. Operating leverage is meaningful when markets are active, but the same leverage reverses in weak cycles.

3. Moat — Buffett

Macquarie's moat is a combination of specialist expertise, regulatory licenses, global client relationships, transaction history, risk systems and scale rather than a consumer brand or network effect. In infrastructure, renewables, commodities and private markets, accumulated knowledge and trusted execution can win mandates and repeat capital. The moat is durable but not absolute: talent can leave, competitors can copy products and capital markets are globally competitive.

The moat is probably stable to modestly widening in specialist infrastructure and private-markets niches, while more commoditised investment banking and asset management remain contestable. Buffett's key question is whether returns survive a full cycle without relying on unusually favourable rates, deal activity or commodity volatility.

4. Reverse Thinking & Risks — Munger

The inversion is important: FY2026's 30% profit growth is strong, but some earnings are transaction- and market-dependent. Historical analogies are diversified investment banks and alternative managers that look inexpensive after peak earnings and expensive after trough earnings. Disconfirming evidence would be several years of recurring earnings growth, stable credit losses and resilient fee-earning assets through a weak market cycle; contrary evidence would be declining MAM flows, weaker capital-markets volumes and rising impairments.

5. Management — Duan Yongping + Buffett

The annual report describes 57 years of unbroken profitability, disciplined capital allocation and alignment through staff co-investment and shareholder participation. FY2026 management reported earnings growth in each major business area, while maintaining a substantial regulatory capital and liquidity framework. The governance model is institutional rather than founder-dependent, which supports continuity.

The counterpoint is incentive complexity: performance fees, carried interests, transaction revenues and employee ownership can reward risk-taking as well as value creation. The test is whether management continues reallocating capital toward attractive risk-adjusted returns, preserves balance-sheet resilience and returns capital without treating a strong cycle as permanent.

6. Industry & Civilizational Trend — Li Lu

Macquarie sits in the capital-allocation layer of the economy. Ageing savings, infrastructure investment, energy transition, digitisation and private credit support long-run demand for asset management, financing and specialist risk intermediation. The total addressable market is large, but competition is intense and regulation limits leverage and product design.

AI and automation may improve research, trading and operations while also compressing fees and changing the value of human intermediation. Macquarie's specialist domain knowledge and distribution are advantages, but technological change is a competitive variable rather than a one-way tailwind. Li Lu's long-horizon question is whether the company remains a trusted allocator and risk manager after financial products become more transparent and cheaper; the answer is plausible, not certain.

7. Valuation & Scenarios — Buffett + Duan

At A$253.76, FY2026 EPS of A$12.77 implies about 19.9x trailing earnings and the A$7.00 dividend implies a cash yield of about 2.8%. This is not a distressed price: it assumes Macquarie's quality and earnings recovery persist. The valuation is reasonable for a high-quality compounder if normalized EPS grows mid-single digits, but offers limited margin of safety if FY2026 benefits from a favourable cycle.

The scenario base is A$12.77 EPS. For 3 years, the bull case assumes 12% normalized EPS growth and 22x, the base 6% and 18x, and the bear -4% and 13x; probabilities are 25%/50%/25%, producing a weighted target of A$260.25. For 5 years, the bull assumes 10% growth and 22x, the base 6% and 18x, and the bear -2% and 13x; the weighted target is A$300.00. These are analytical scenarios, not forecasts. Dividends and franking may improve total return, but distributions are not guaranteed.

8. Decision Memo

Stance: Hold / watchlist. Macquarie has an unusually strong specialist financial franchise, credible management and long-term structural demand, but the current price gives only a modest margin of safety. Existing holders can hold while recurring fee earnings, asset quality and capital remain sound. New buyers should prefer A$205-A$230 or a demonstrably lower forward multiple.

The thesis is invalidated by persistent deterioration in MAM fee-earning assets, BFS credit and funding metrics, repeated capital-markets underperformance, or a governance/regulatory event. Add on a valuation reset accompanied by stable recurring earnings; sell or reduce if earnings prove peak-cycle and the multiple remains elevated.

Four-Master Commentary

Analytical simulation — Buffett: "I like the specialist franchise, recurring client relationships and disciplined capital allocation. But I want to buy a financial business on normalized earnings, not on the best year of a market cycle."

Analytical simulation — Munger: "Invert it: the loss comes from credit stress, fee compression, talent departures or paying a peak multiple. The business is good, but the margin of safety is the price."

Analytical simulation — Duan Yongping: "A durable organization with capable people and repeat economics is attractive. I would wait for a better price and watch whether management keeps allocating capital rationally through a downturn."

Analytical simulation — Li Lu: "Macquarie benefits from long-term capital formation, infrastructure and financial complexity, but technology and regulation can reshape the industry. The right question is whether its specialist advantages compound faster than competition erodes them."