UPDATE 1-Macquarie exec says undoubtedly will pursue deals

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By Joseph A. Giannone

NEW YORK, Sept 8 (Reuters) - A senior executive at Macquarie Group Ltd (MQG.AX), Australia's largest investment bank, said on Monday that Macquarie's balance sheet remains strong despite the global credit crunch, giving it an ability to "undoubtedly" pursue acquisitions over the next 12 months.

Macquarie, best known as the world's leading acquirer of public infrastructure assets, has been punished by investors during the past year amid concern that business would be squeezed by the breakdown in financing markets. Yet Richard Sheppard, a deputy managing director at the bank, insisted that Macquarie's capital base and business prospects both remain strong.

"We have substantial surplus capital to our needs," Sheppard told Reuters on the sidelines of a Merrill Lynch investor conference here in New York. "We certainly have the capability to take advantage of acquisition opportunities, though not huge relative to our capital. We'd be surprised if there weren't some acquisitions over the next 12 months."

Sheppard said the market's recent upheaval will make more businesses available.

"We think these volatile markets will provide as many opportunities as they will problems," he said. "We tend to wait until we can acquire business and people at attractive terms."

He declined to comment on whether Macquarie would be interested in acquiring its struggling rival, Babcock & Brown Ltd (BNB.AX), or any other specific company. Sheppard said Macquarie would not be in the market for a U.S. consumer bank, though the sector has been hammered by rising loan losses.

REASSURING INVESTORS

Macquarie in the past year acquired Giuliani Capital Partners, a middle-market advisory firm once affiliated with former New York Mayor Rudolph Giuliani, and CIT Group Inc's (CIT.N) systems leasing unit.

These comments followed a broader presentation by Sheppard to investors. Macquarie is seeking to assure investors that its financial health remains strong and to differentiate itself from other banks struggling to overcome crippling mortgage and credit losses.

Sheppard said the bank has a capital base of about $A10 billion, of which it considers A$3 billion to be surplus.

The bank's shares are up 14 percent over the past year -- stellar performance compared with the steep declines posted by many financial companies worldwide. Yet they are down 7.4 percent over the past 6 months, as investors worry whether Macquarie can continue to generate standout performance amid an economic slowdown.

Sheppard also observed the group has other businesses beyond infrastructure, and is diversified outside of Australia.

That said, Sheppard reaffirmed the bank's July warning that profit this fiscal year would likely decline from the A$1.8 billion it made in the year ended March 2008. It would be the bank's first profit drop in 17 years.

Analysts on average expect Macquarie's net profit to fall 11 percent to A$1.6 billion for fiscal 2009, according to Reuters Estimates.

While its shares have been battered along with those of its U.S. peers, and its deal flows have slowed in face of frozen credit markets, Macquarie does not have the same mortgage-related difficulties as U.S. and European banks. (Additional reporting by Sonali Paul, editing by Gerald E. McCormick) (A$1.00=US$0.81)