MBL macquarie bank limited

Macquarie banks on listed funds

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    Macquarie banks on listed funds
    By Anthony Hughes
    May 17 2002

    Macquarie Bank shares soared yesterday after the bank painted a positive outlook amid bleak times in the global investment banking industry.

    Macquarie yesterday reported an annual net profit of $250 million, up 3.3 per cent and in line with forecasts downgraded earlier this year.

    The shares, struck down after the bank doused profit expectations in February, soared $1.81 to $31.45.

    Broking analysts said the bank, where growth was capped largely because of a break-even result in its equity markets division, would see its risk profile reduced as it increasingly relied on management fees from specialist investment funds.

    Macquarie managing director Allan Moss said profits would flow to the bank from its new fund initiatives over the next six to 12 months and more new funds were being planned.

    As a result of last September's $500 million equity issue and option exercise during the year, earnings per share fell from $1.39 to $1.33 a share despite the headline rise in profit.

    Total funds under management grew from $30.9 billion to $41.3 billion, the bulk via listed funds such as Macquarie Infrastructure Group and Macquarie Airports Group.

    "It's the right kind of product for this market because the market is looking for certainty and a high degree of reliance on earnings growth," Mr Moss said.

    He deflected concern that the bank was carrying a a large risk by holding the assets of NTL Australia, bought for $850 million, on its balance sheet ahead of launching a new communications fund in the third quarter. A refinancing deal would reduce Macquarie's total capital commitment to $200 million.

    "There are always risks but we feel we have bought this asset so well. It's such a high-quality asset that the risks are minimal," he said.

    Figures provided by the bank showing the NTL purchase was struck on low multiples and its forecast sales were secure comforted analysts.

    Mr Moss said the investment bank would be one of the few in the world to increase staff numbers in the past year, albeit by a modest 260 positions to 4726.

    "We have not frozen pay but we have recognised in our remuneration reviews that it is a much more subdued employment market. We are growing our business so we will continue to hire, but selectively."

    The bank was seeing a pick-up in merger and acquisition activity partly due to increased market share.

    "I don't think we will see the major investment banks completely exit the Australian market but we will see further reductions in staff numbers (from competitors)," Mr Moss said.

    Macquarie declared a steady 52 cents-a-share final dividend, payable on July 2, bringing the annual return to 93 cents.
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