SYDNEY: Australia's top investment bank Macquarie Group Ltd warned investors on Monday, Sept 6 it would miss forecasts for the first half after weak markets took a toll on its trading and advisory business, sending its shares down as much as 8 percent to a 15-month low.
Macquarie, dubbed the "millionaires' factory" for its senior bankers' hefty pay packages, said its first half net profit would fall by a quarter, following its two previous warnings that volatile markets were hurting its performance.
Macquarie is not alone in suffering. Global rivals such as Goldman Sachs, Morgan Stanley, investment bank units of JPMorgan and Credit Suisse have all shared grim outlooks.
Globally advisory fees have fallen as deal flow slowed and trading volumes have thinned amid increased market volatility and fears of a double-dip recession.
Equity capital market volumes have slid 10 percent and debt raising slipped nearly a fifth so far this year and have been unable to offset a 23 percent rise in mergers and acquisitions volumes, according to Thomson Reuters data.
Macquarie's trading and advisory businesses make up nearly three-quarters of its revenue.
"Its the cyclical factors that are battering them. The second half is'' crucial for Macquarie. If markets come back they are well positioned to benefit," said Angus Gluskie, chief investment officer at White Funds Management, which owns Macquarie shares.
"Activity levels have remained soft but there signs of a pick-up are emerging. If they do, Macquarie will return to more normalized profitability."
At 0110 GMT, Macquarie shares had trimmed losses to 4.3 percent to A$35.43 in a slightly positive broader market. The shares had fallen as much as 8.1 percent to its lowest since June 2009.
Its shares are down 27 percent so far this year and the stock has recorded just three annual falls in the past 14 years.
"Conditions in most markets have continued to be weak," Deputy Managing Director Richard Sheppard said in a presentation to be given later in London.
"Full-year result continues to be impacted by the cost of our continued conservative approach to funding and capital."
Macquarie's prediction for a 25 percent first half profit fall compares with consensus expectations for 11 percent rise.
Its guidance that 2011 full-year profit would be in line with the previous year is also worse than forecasts for 14 percent rise.
Macquarie until recently consistently beat expectations with its model of buying and pooling assets, listing them on an exchange and charging fees for managing.
But a migration to a more conventional investment banking model in the wake of the global financial crisis'' has married its fortunes to the market.
Macquarie, which gets almost half its revenue from Australia, is using its surplus to cash to expand in the United States and Europe.
Macquarie, which has A$3.1 billion in surplus capital and A$29 billion in liquid assets, had twice earlier warned concerns about the global recovery had dragged down market activity to their lowest level since 2004, pushing analysts to cut forecasts.
But this is the first time it has given a specific forecast and analysts are expected to slash forecast once again. - Reuters
Macquarie, dubbed the "millionaires' factory" for its senior bankers' hefty pay packages, said its first half net profit would fall by a quarter, following its two previous warnings that volatile markets were hurting its performance.
Macquarie is not alone in suffering. Global rivals such as Goldman Sachs, Morgan Stanley, investment bank units of JPMorgan and Credit Suisse have all shared grim outlooks.
Globally advisory fees have fallen as deal flow slowed and trading volumes have thinned amid increased market volatility and fears of a double-dip recession.
Equity capital market volumes have slid 10 percent and debt raising slipped nearly a fifth so far this year and have been unable to offset a 23 percent rise in mergers and acquisitions volumes, according to Thomson Reuters data.
Macquarie's trading and advisory businesses make up nearly three-quarters of its revenue.
"Its the cyclical factors that are battering them. The second half is'' crucial for Macquarie. If markets come back they are well positioned to benefit," said Angus Gluskie, chief investment officer at White Funds Management, which owns Macquarie shares.
"Activity levels have remained soft but there signs of a pick-up are emerging. If they do, Macquarie will return to more normalized profitability."
At 0110 GMT, Macquarie shares had trimmed losses to 4.3 percent to A$35.43 in a slightly positive broader market. The shares had fallen as much as 8.1 percent to its lowest since June 2009.
Its shares are down 27 percent so far this year and the stock has recorded just three annual falls in the past 14 years.
"Conditions in most markets have continued to be weak," Deputy Managing Director Richard Sheppard said in a presentation to be given later in London.
"Full-year result continues to be impacted by the cost of our continued conservative approach to funding and capital."
Macquarie's prediction for a 25 percent first half profit fall compares with consensus expectations for 11 percent rise.
Its guidance that 2011 full-year profit would be in line with the previous year is also worse than forecasts for 14 percent rise.
Macquarie until recently consistently beat expectations with its model of buying and pooling assets, listing them on an exchange and charging fees for managing.
But a migration to a more conventional investment banking model in the wake of the global financial crisis'' has married its fortunes to the market.
Macquarie, which gets almost half its revenue from Australia, is using its surplus to cash to expand in the United States and Europe.
Macquarie, which has A$3.1 billion in surplus capital and A$29 billion in liquid assets, had twice earlier warned concerns about the global recovery had dragged down market activity to their lowest level since 2004, pushing analysts to cut forecasts.
But this is the first time it has given a specific forecast and analysts are expected to slash forecast once again. - Reuters
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