By Angus Whitley and Shani Raja Feb. 9 (Bloomberg) — Macquarie Group Ltd. , Australia’s largest investment bank, slumped in Sydney trading after its second-half profit forecast failed to match analyst estimates. The shares dropped 6.6 percent to A$47.05 at 11:10 a.m. local time, the most since May. Net income in the six months to March 31 might climb 10 percent from the first half’s A$479 million ($414 million), Macquarie said, shy of analyst estimates and up from the company’s October prediction that earnings would be “broadly in line” with the first half. Today’s forecast is “slightly below the more bullish analysts,” said Angus Gluskie , who oversees $300 million at White Funds Management Pty in Sydney. “Some investors were looking for a greater upgrade, so on a short-term basis are happy to close out positions given the softness in the market.” Other Australian financial companies such as Commonwealth Bank of Australia and Axa Asia Pacific Holdings Ltd. have reported profits that beat analyst estimates as markets recover from the global financial crisis. Macquarie said its forecast for earnings growth is “subject to market conditions, significant swing factors and unexpected one-off items.” Profit at Macquarie is set to climb to A$1.05 billion in the year ending March 2010 from A$871 million, and to A$1.51 billion in the following 12 months, according to the mean of five analyst estimates compiled by Bloomberg. Bulls Disappointed Sydney-based Macquarie, with capital of A$4.5 billion above the regulatory minimum at the end of December, said today the completion of acquisitions will add to services on offer worldwide, without detailing any earnings contributions. “They’ve issued an outlook statement that is qualified with a number of items, which seems to have muddied the water a bit instead of providing the clarity that a statement of this nature seeks to provide,” said Prasad Patkar , who helps manage about $1.5 billion at Platypus Asset Management in Sydney. Chief Executive Officer Nicholas Moore has used the slowdown to spend more than $770 million on acquisitions last year in North America, ranging from energy advisory and asset management units to brokerages. “There’s a fair bit more to come,” said Hugh Dive , who helps manage about $3 billion at Investors Mutual Ltd. in Sydney. Moore is performing a “balancing act” between buying assets and keeping a capital cushion against volatility, said Dive. Macquarie last week agreed to buy the equity trading and research operations of Sal. Oppenheim Jr. & Cie KGaA to expand its business in Europe, following a December agreement to buy Sal.’s derivatives business. ‘Back to Normal’ “I am not ruling out any acquisitions, but in terms of normal trends, you’d expect those to be going back to normal rates as markets settle down,” Moore said on a call with investors today. “We have sufficient capital for the plans we are working on at the moment.” Moore said in an interview last October that any expansion through acquisitions would be “incremental” and that he was adopting a “conservative stance.” “Despite improving trends in a number of major markets, we continue to maintain a conservative approach to funding and capital,” Moore said today in the statement. Profit at Macquarie may almost double in the next two years as such takeovers pay off and fees swell from advising on mergers and acquisitions, Bank of America Merrill Lynch said in a Jan. 28 report. Macquarie Capital, which arranges debt and equity sales, and gives corporate advice, will drive growth, Bank of America said. Macquarie Capital Moore said today the operating result at that unit in the three months ended December fell from the previous quarter, but was higher than the three months ended June. That matched the trend at the securities division, the corporate and asset finance business, and the fixed-income, currencies and commodities division, he said. In Australia, where Macquarie makes about half its income, the benchmark S&P/ASX 200 has climbed for three consecutive quarters. If that trend continues, companies are more likely to attempt takeovers, boosting earnings at the banks advising on the deals, said Peter Swan, finance professor at the Australia School of Business at the University of New South Wales. “There’s always a cyclical effect,” said Swan. “M&A is much more successful when investors are more optimistic. That’s what Macquarie is relying on.” Australia’s government said on Feb. 7 that it will withdraw on March 31 a guarantee on large deposits and wholesale funding that helped banks access credit after the global financial crisis. That removal is “not expected to impact” Macquarie’s funding position, the bank said today. Moore is returning to more traditional investment banking, shifting away from a so-called satellite model which involved buying and pooling assets, listing them, and extracting fees for managing the businesses. Impairment charges on those assets put an end to 16 years of profit growth at Macquarie in the year ended March 2009. To contact the reporter on this story: Angus Whitley in Canberra at awhitley1@bloomberg.net
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Macquarie Group Shares Tumble as Profit Forecast Misses Analyst Estimates
