* Record net operating income from fixed income, currencies
and commodities unit
* Analysts caution similar growth may be hard to replicate
* Expects trading unit to benefit from better markets in
By Swati Pandey and Melanie Burton
SYDNEY, May 2 Strong trading gains in the U.S.
energy markets bumped up annual earnings for top Australian
investment bank Macquarie Group Ltd, helping lift its
net profit over A$1 billion ($927.25 million) for the first time
in four years.
Net operating income from trading hit a record A$1.7 billion
led by gains in gas and power markets in the United States and
global oil, while client hedging and trading in metals and
energy segments were also up.
Over the last decade, the business has become increasingly
important to the Australian banking group's fixed income,
currencies and commodities unit (FICC), which now generates some
60 percent of its operating income from commodity markets.
Macquarie has grown its commodity trading business through a
handful of bite-sized U.S. acquisitions, and on Friday
re-iterated that it was still looking to expand through
self-funded growth initiatives and acquisitions.
It started small, buying a natural gas trading desk, Cook
Inlet Energy Supply, in 2005, and followed that with a larger
deal for Constellation Energy Partners' downstream
natural gas trading operations in 2009. It began trading
physical power in 2007 and, eventually, physical oil in 2010.
While Macquarie expects the segment to benefit from better
market conditions in the medium term, analysts caution that such
massive trading gains may not be easily replicated in coming
"It's a good, large business (but) it's a cyclical business,
not a growth business. Some years you make money, some years you
don't," a banking sector analyst with a foreign brokerage in
FICC, which provides trading, research, sales and financial
services across the globe, posted net profit of A$726 million
for the year-ended March 2014 compared with $563 million a year
ago. The combined annual profit for the group rose nearly 50
percent from a year ago to A$1.27 billion.
Macquarie, which maintained its ranking as No. 4 U.S.
physical gas marketer in North America, said overall income from
the Americas exceeded its strong Australian business for the
Profits may have been boosted by higher natural gas prices
in the United States, where an exceptionally cold winter
resulted in a spike in demand for the fuel. Natural gas prices
at key delivery point Henry Hub rose more than 50 percent in the
beginning of the year.
Trading and hedging in metal and agricultural markets also
picked up after a weak first half. Macquarie's physical metals
trading and financing activities also boosted overall operating
income, the bank said.
In particular, the bank has recommended a bullish stance on
nickel given a ban on Indonesian ore exports that came into
force in January. Nickel prices are up 31 percent this year.
($1 = 1.0785 Australian Dollars)
(Additional reporting by Jacob Gronholt-Pedersen in SINGAPORE;
Editing by Stephen Coates)