Macquarie Says Weak Markets Hurting Key
Businesses
Macquarie Group, Australia's top investment bank, joined
its global peers in warning weak markets mean key
businesses will not meet the previous year's results and added
a high cash level was a drag.
In a trading update ahead of the group's annual general
meeting on Friday, Macquarie said earnings in the quarter to
June 2010 were slightly ahead of the subdued quarter a year
ago but said weak markets were hitting the securities,
investment banking and trading business that make up more than
half its revenue.
The bank stopped short of giving an indication of where
it expected its first half or 2011 earnings to be. A Reuters
poll of eight analysts on average forecast Macquarie's
first-half profit would rise to A$660 million (US$594.1
million).
In June, it said market conditions were hurting
some businesses, marking a more cautious tone from its
previous upbeat forecast in April and sending its shares to an
11-month low.
Macquarie's announcement follows weak earnings from
Goldman Sachs and poor investment banking numbers
from Citigroup and Bank of America Merrill Lynch. While
Morgan Stanley beat expectations it joined others in saying
future earnings could be choppy amid market uncertainty.
"These market conditions are significantly impacting
activity levels in Macquarie Securities, Macquarie Capital and
Fixed Income, Currencies and Commodities," Chief
Executive Nicholas Moore said.
"Accordingly, unless the market conditions experienced in
the June 2010 quarter improve, we do not expect these groups
to meet FY2010 results in FY2011."
Macquarie, which earns nearly half its income in Australia,
has suffered from slower Australian
mergers-and-acquisitions advisory activity and equity
underwriting.
M&A activity targeting the Australasian region fell by 28
per cent to US$65.3 billion and equity issuances fell by 80
per cent year to date, according to Thomson Reuters data.
Ahead of Friday's trading update, a Reuters poll of
eight analysts forecast Macquarie's first half profit to rise
to A$660 million.
Macquarie, dubbed the "millionaires' factory" for its
senior bankers' hefty pay packages, has also suffered from
senior banker exits.
Recently Andrew Low, Macquarie's chief operating officer
and the head of its global financial services advisory
practice, quit.
Jim Rossman, US equity capital markets chief, and
David Baron, head of US financial sponsors coverage, are
among others who have left the bank.
Macquarie said on Friday it has A$3.1 billion in surplus
capital, lower than the A$4 billion at the end of the last
financial year but still significant enough to hurt.
Macquarie is diversifying from the Asia Pacific by
acquiring businesses in North America and Europe. Last year it
made five North American acquisitions and has hired traders
and bankers in the market to more than triple revenue from
that region.