Macquarie Says Weak Markets Hurting Key Businesses
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Macquarie Says Weak Markets Hurting Key Businesses
Macquarie Group, Australia's top investment bank, joined its global peers in warning weak markets mean key businesses will not meet the previous year's results and added a high cash level was a drag.
In a trading update ahead of the group's annual general meeting on Friday, Macquarie said earnings in the quarter to June 2010 were slightly ahead of the subdued quarter a year ago but said weak markets were hitting the securities, investment banking and trading business that make up more than half its revenue.
The bank stopped short of giving an indication of where it expected its first half or 2011 earnings to be. A Reuters poll of eight analysts on average forecast Macquarie's first-half profit would rise to A$660 million (US$594.1 million).
In June, it said market conditions were hurting some businesses, marking a more cautious tone from its previous upbeat forecast in April and sending its shares to an 11-month low.
Macquarie's announcement follows weak earnings from Goldman Sachs and poor investment banking numbers from Citigroup and Bank of America Merrill Lynch. While Morgan Stanley beat expectations it joined others in saying future earnings could be choppy amid market uncertainty.
"These market conditions are significantly impacting activity levels in Macquarie Securities, Macquarie Capital and Fixed Income, Currencies and Commodities," Chief Executive Nicholas Moore said.
"Accordingly, unless the market conditions experienced in the June 2010 quarter improve, we do not expect these groups to meet FY2010 results in FY2011."
Macquarie, which earns nearly half its income in Australia, has suffered from slower Australian mergers-and-acquisitions advisory activity and equity underwriting.
M&A activity targeting the Australasian region fell by 28 per cent to US$65.3 billion and equity issuances fell by 80 per cent year to date, according to Thomson Reuters data.
Ahead of Friday's trading update, a Reuters poll of eight analysts forecast Macquarie's first half profit to rise to A$660 million.
Macquarie, dubbed the "millionaires' factory" for its senior bankers' hefty pay packages, has also suffered from senior banker exits.
Recently Andrew Low, Macquarie's chief operating officer and the head of its global financial services advisory practice, quit.
Jim Rossman, US equity capital markets chief, and David Baron, head of US financial sponsors coverage, are among others who have left the bank.
Macquarie said on Friday it has A$3.1 billion in surplus capital, lower than the A$4 billion at the end of the last financial year but still significant enough to hurt.
Macquarie is diversifying from the Asia Pacific by acquiring businesses in North America and Europe. Last year it made five North American acquisitions and has hired traders and bankers in the market to more than triple revenue from that region.