May 3, 2018 / 11:26 PM / 20 days ago

CORRECTED-UPDATE 3-Australia's Macquarie delivers record profit, unscathed from banking inquiry

(Corrects CEO Name to Nicholas in 5th par)

* Record $1.9 bln year profit helped by asset management & banking

* Beats expectations and declares record dividend

* Shares jump to record high

* Macquarie so far unscathed from banking inquiry

By Paulina Duran

SYDNEY, May 4 (Reuters) - Australia’s Macquarie Group delivered a record annual profit and dividend on Friday, beating expectations as higher fees and commissions from its asset management unit helped offset weakness in its financial markets business.

The country’s biggest investment bank booked a loss on its controversial investment in NYSE-listed Macquarie Infrastructure Fund (MIC) but still managed to grow earnings from asset management.

Net profit rose 15 percent to A$2.56 billion ($1.9 billion) for the year ended March 31, Macquarie said, beating its own 10 percent growth projection and an average forecast of A$2.48 billion from 13 analysts polled by Thomson Reuters I/B/E/S.

Macquarie has been largely unscathed by a powerful independent inquiry which has revealed widespread misconduct in Australia’s financial sector.

Asked if the Royal Commission, as the year-long inquiry is called, would bring opportunities for the bank, which currently holds less than two percent of Australia’s mortgage market, Chief Executive Nicholas Moore said it was too early to tell.

“There’s a long path ahead of us, and so we certainly aren’t making any calls in terms of opportunities or threats coming out of it at this stage,” Moore told Reuters in an interview after the results.

“We are taking it very seriously and we are applying the lessons on an ongoing basis as we see things.”

Earnings for the current fiscal year were expected to be broadly in line with the past year. It announced a record interim dividend of A$3.20 per share, up 14 percent.

Macquarie shares jumped to a record high before closing 0.2 percent higher, while the broader market was 0.5 lower.

Dubbed the “millionaire’s factory” due to the salaries of its most successful executives, the Sydney-based bank makes money from M&A advisory and fees and trading commodities such as shares, currency and oil.

Its biggest-earning asset management unit collects fees based on the performance of its global funds, which are meant to be a less volatile source of income.

MIC IMPAIRMENT

MIC unexpectedly cut dividends by 30 percent in February after one of its five businesses lost key clients, prompting a group of investors led by New York-based Moab Capital to demand a reshuffle of the fund’s board.

The fund has lost 40 percent of its market value since then, with disgruntled investors claiming the fund manager has misled them and is funnelling hundreds of millions of dollars in fees to the parent, Moab director Michael Rothenberg told Reuters.

Macquarie, which manages MIC on behalf of shareholders as part of its A$495 billion asset management business, took a A$191 million impairment expense on its investments, largely driven by its MIC holdings. Despite the hit, the unit posted a 10 percent jump in profit to A$1.69 billion.

MIC had issued a response on Wednesday disputing the claims and urging investors to vote for all directors at the shareholder meeting on May 16.

On Friday, Moore was unable to say whether the controversy had affected the bank’s fund-raising efforts in the United States.

The profit contribution from its banking and financial services division also rose to A$560 million, from A$513 million the previous year.

The contribution of its commodities and global markets unit fell 6 percent to A$910 million, as a year of low market volatility and tight credit spreads hurt its financial markets business. ($1=A$1.3284) (Reporting by Rushil Dutta in Bengaluru; Editing by Stephen Coates)

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