Macquarie warns of slowdown

Macquarie chairman David Clarke (left) and chief executive Allan Moss still expect the investment bank to at least match in 2006 its record 2005 profit of A$823 million. Picture / Reuters

SYDNEY - Australian investment bank Macquarie Bank beat forecasts with an 88 per cent rise in first-half profit on strong fee income from overseas expansion, but its shares fell after it warned fee growth from its managed funds might slow in the second half.

Macquarie, with assets under management rising 16 per cent to A$112 billion ($120 billion), said growth in performance fees from its listed managed funds in the first half was unlikely to be repeated in the second half.

"That put a dampener on it," Stuart Smith, a senior client adviser at broker Bell Potter, told Reuters. "As soon as I read that I thought, 'Hello, caution'."

Macquarie, which might bid as part of a consortium for the 300-year-old London Stock Exchange, said it still expected to at least match in 2006 its record 2005 profit of A$823 million after a one-off gain from a property merger.

That would be 8 per cent weaker than six analysts' forecasts, on average, of A$896 million from a Reuters poll. Analysts' 2006 estimates had ranged from A$837 million to A$974 million.

Macquarie, which manages assets from toll roads, airports, bridges and utilities to media firms and aged care homes, said its international income more than doubled in the first half and now accounted for 46 per cent of total income of A$2.16 billion.

"The deal pipeline is satisfactory overall, including investment banking and equity capital markets," said chief executive Allan Moss. "We don't think we are in a bubble for infrastructure [asset prices]."

Net profit for the six months ended September 30 climbed to A$482 million from A$256 million a year earlier, driven by fee income from its listed funds, deal-making advice and its trading desks amid buoyant equity markets.

Shares in Macquarie were down A$1.40, or 2 per cent, at A$68.50. Still, the stock is up about 47 per cent so far this calendar year.

The bank, operating in over 21 countries, said it would pay a better-than-expected interim dividend of 90Ac per share, up 48 per cent.

Dubbed the "millionaires' factory" because of the rewards it pays its top executives, Macquarie said its international staff increased by 32 per cent to 2037. Overseas staff made up about 29 per cent of total staff of 7125 at September 30.

Increasing uncertainty in global equity markets was hurting demand for equity products and market volumes might have peaked, said Macquarie, adding that despite diversifying its business, results "remain contingent on global equity market conditions."

About three-quarters of its advisory deals from its investment banking unit were outside Australia, including the US$1.7 billion ($2.49 billion) purchase by a Macquarie-led consortium of Norwegian explosives maker Dyno Nobel.

Macquarie was ranked number one for equity-linked fund raising in Australia for the nine months to September 30, according to Thomson Financial.

The bank is planning to raise nearly A$1 billion for a new media fund to list on the local sharemarket.

Macquarie buys assets and later bundles its interests into a fund it has set up and from which it draws management, advisory and performance fees. It also helps spread the risk.

Macquarie said in August it was considering a bid as part of a consortium for the London Stock Exchange.

The bank has hired US investment bank Goldman Sachs as an adviser on the LSE.

- REUTERS