* H1 net profit A$501 mln vs forecast of A$475 mln
* Shares surge on earnings, Sydney Airport proposal,
* Earnings rise powered by asset management, IPOs
* Shares up some 50 percent for year to date
By Jackie Range
SYDNEY, Nov 1 Australia's top investment bank
Macquarie Group Ltd booked a better-than-expected 39
percent increase in first-half net profit, bolstered by a strong
performance from its asset management division.
The results underscore how Macquarie's diversification away
from investment banking into less riskier areas such as
annuity-style businesses have helped it weather volatility in
capital markets better than other investment banks.
By contrast, third-quarter profit for Barclays slid
26 percent with the bank blaming a slowdown in capital markets
while Goldman Sachs Group Inc recently slashed employee
compensation costs by 35 percent after revenue weakened.
Setting itself up for a robust annual result, Macquarie
posted first-half net profit of A$501 million ($474 million),
also helped by a pick-up in equity financing. It was its
strongest first half since the first six months of 2009, beating
an average projection of A$475 million.
Second-half profits are often much stronger than the first
half of the year and Macquarie reiterated that annual net profit
would strengthen in 2014, providing that market conditions were
no worse than they had been in the year before.
Macquarie's shares surged after the results, with investors
also keen on the investment bank's proposal to distribute most
of its 17 percent stake in Sydney Airport Holdings Ltd
to shareholders - a decision it took as the holding no longer
fits the bank's focus.
"The strong operating performance and the Sydney Airport
distribution confirms our positive view and suggests Macquarie
is on the way back to doing what it does best - taking full
advantage of the recovery in equity and investment markets,"
said Morningstar analyst David Ellis.
Macquarie also unveiled an interim dividend of A$1.00 a
share, up from the A$0.75 it paid in the first half of last
The shares ended the day 4.2 percent higher at A$53.10,
compared to a 0.3 percent decline for the broader market. The
shares have rocketed some 50 percent for the year to date on
hopes that a rebound in mergers and acquisitions as well as
initial public offerings would drive earnings higher.
FUNDS AND IPOS
Its funds division, which manages assets for institutional
and retail investors, was a key contributor posting a 40 percent
rise in profit to A$500 million, bolstered by a rise in base
Assets under management rose 11 percent to A$380.7 billion
bolstered in part by fund raising and investments in its
An upswing in IPOs also helped earnings. The bank has been
involved in some high profile domestic deals, acting as a
joint-manager for OzForex Group which raised A$440
million in its October initial public offering, a business in
which it had also been a pre-IPO investor.
Macquarie has ranked number one in Australia so far this
year for mergers and acquisitions involvement and number two in
equity capital markets, according to Thomson Reuters data.
Macquarie Securities, which contains the bank's equities
arm, made a first-half net profit contribution of A$71 million,
up from a loss of A$64 million in the same period a year
The bank has also rapidly been increasing its exposure to
the Australian mortgage market, threatening to disrupt a highly
profitable segment of the banking industry long dominated by the
country's top four lenders: Australia and New Zealand Banking
Group Ltd, Commonwealth Bank of Australia,
National Australia Bank Ltd and Westpac Banking Corp
The bank said its Australian mortgage portfolio had
increased 26 percent since March to A$14.6 billion, or 1 percent
of the nation's mortgage market.