NEWS - Financial Services
Published 3:13 PM, 30 Oct 2009
Last update 4:21 PM, 30 Oct 2009
Macquarie optimistic about medium term despite volatility
By a staff reporter
Macquarie Group Ltd has maintained its cautious outlook for the Australian economy, saying while it expects fewer one-off items in the second half, the investment bank cannot be sure that recent "buoyant" conditions will continue.
Chief executive Nicholas Moore said providing guidance, difficult at any time, was particularly so in times like these, but added that he was "optimistic" about where the group is headed in the medium term.
"Have the markets fully returned to normal? Not yet, not yet, but certainly they've been improving rapidly," he said, after Macquarie posted a $479 million first-half profit, down 20 per cent from a year earlier but better than the bank's own forecast of about $435.5 million.
"We're assuming that the world is returning to normal," he said.
"Markets are volatile, they are uncertain....We do not know plainly where we'll be in six months' time.
"In the medium term, our businesses continue to grow.
"In the medium term, we have quite a degree of optimism across the group."
The Sydney-based group also forecast its fiscal 2010 second-half profit was likely to be in line with the first-half's $479 million, taking the full-year figure to about $958 million – compared with an $871 million profit for the 2009 fiscal year, and well below its pre-global financial crisis profit of $1.8 billion.
Wholesale guarantee
Questioned on whether the government's guarantee on wholesale borrowing was still necessary, Mr Moore said the government had said it would be there "as long as necessary".
"It was brought in in exceptional circumstances last year when things were very unusual indeed," he told reporters.
"We don't want to pay the fee .... it's in no one's interest to be paying the fee [to the government] unnecessarily."
Macquarie has not used the guarantee since July.
Mr Moore said while the guarantee – introduced after the collapse of US investment giant Lehman Bros in September last year – was by no means essential to its solvency, damage to its profit and loss statement would have been great in its absence.
"The world needed the government to step in the way that they did – I think the answer is absolutely clear," he said.
Overperformance, not underperformance
Questioned whether moves by satellites to sever ties with the parent group equated to the unwinding of the so-called Macquarie empire, Mr Moore described the changes as simply "responding to market conditions".
In the past few months, Macquarie Airports Ltd (MAp) and Macquarie Media Group Ltd have moved to internalise their management, while Macquarie Infrastructure Group Ltd (MIG) said today it would split its tollroads portfolio into two separately listed entities.
Shareholders have "very much benefited" from moves to ensure that the listed price reflected the underlying value of the funds, Mr Moore said.
"The performance of these funds, not all of them, but if you go through one by one, has been a question of outperformance rather than underperformance," he said.
"MAp is clearly a case of outperformance," Mr Moore said.
"As I understand, MIG again is a question of outperformance.
"I don't think it's fair to say there has been underperformance in terms of the listed performance."
In regard to shareholder anger over the $345 million price tag for MAp to sever ties, Mr Moore said with about 80 per cent of investors voting in favour of the deal, the "facts speak for themselves".
Acquisitions
Asked whether the 'Macquarie model' had changed, Mr Moore said the group's growth had always been a combination of organic growth and acquisitions, and he expected continued growth from the infrastructure business.
On the question of future acquisitions, Mr Moore said they would depend very much on opportunities available in the marketplace.
Macquarie has been on a North American acquisition spree in the past five months, announcing this week plans to buy Canada's Blackmont Capital for $C93.3 million.
He defended the first-half dividend of 86 cents per share, unfranked, compared with the $1.45 payment the year before, citing two elements – high impairment levels, and the fact that half of the group's earnings come from overseas – for the decision.
Storm Financial
Asked by reporters whether Macquarie was happy with the way it had dealt with clients of Storm Financial, Macquarie Bank managing director Richard Sheppard defended the group's track record.
Macqarie's involvement with Storm was primarily as a supplier of margin loans, Mr Sheppard said, and in "all cases" advised clients to manage risks inherent in margin loan agreements.
Mr Sheppard – who recently appeared at an inquiry into the collapse of the Townsville financial planner – said Macquarie required individuals to sign documents saying they understood the risks involved and advising that they seek independent financial advice.
"Without in any way diminishing the fact that clients of Storm experienced ... severe losses ... we have established dispute resolution procedures," he said.
The Commonwealth Bank of Australia Ltd and law firm Slater and Gordon signed a deal earlier this week related to the bank's lending to Storm clients.
At the market's official 1615 AEDT close, shares in Macquarie were 1.52 per cent higher at $50.0, against a 1.5 per cent rise in the benchmark index.
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