Macquarie chief still backs business model after airports move

SYDNEY - Macquarie Group, Australia's biggest investment bank, said the business model of buying assets and bundling them into listed funds isn't broken after the company severed management ties with its airports affiliate.

"It's a collection of businesses that all operate very closely together," chief executive officer Nicholas Moore said before the company's annual meeting in Sydney yesterday.

"At all our groups our people are looking at the market, looking at what's available, and making use of opportunities." Moore has been distancing the company from its publicly traded funds after a 16-year streak of earnings gains ended last year as the bank wrote down the value of the so-called satellite funds it spawned.

The company agreed last week to sever management ties with Macquarie Airports in return for A$345 million of stock in the airport manager.

"Macquarie has demonstrated in the past that it can evolve and come up with new ideas," said Hugh Dive at Investors Mutual in Sydney. "It's hard to see where exactly they go from here, but it's proven over the years to be a very adaptable company."

The bank's satellite businesses have been selling assets to pare debt after values tumbled. Macquarie CountryWide Trust agreed this month to sell its 75 per cent interest in a US property portfolio for US$1.3 billion, while last month shareholders of Macquarie Communications Infrastructure Group agreed to a A$1.64 billion takeover from Canada Pension Plan Investment Board.

Macquarie Infrastructure Group, a publicly traded toll-road fund managed by Macquarie, may sell the leases on the Chicago Skyway and Indiana Toll Road as it seeks to raise cash, investors said.

Macquarie Group's operational performance improved in the quarter to June, and it had surplus capital of A$4.3 billion above minimum requirements, the bank said yesterday.

"We're very confident that in the medium term, given the strength of the balance sheet we have today, the strength of the team, the global footprint, and the market conditions, that we will see quite a lot of new activity," Moore said.

Macquarie Group's profit surged 12-fold during the past decade to a record A$1.8 billion in the year to March 2008.

The gains were partly fuelled by borrowing to buy infrastructure assets including Thames Water and Sydney Airport, bundling them into funds and pocketing transaction and management fees throughout the process.

- BLOOMBERG