Macquarie sees 25 pct H1 profit fall; shares tumble-UPDATE 2

Trade the News

Tuesday September 07, 2010 06:45:00 AM GMT

* Sees H1 profit down vs expectations for a 10.6 pct rise

* Shares tumble to 15 month low

* Markets hurting key trading and advisory business (Adds shares, Deputy MD comments, details)

SYDNEY, Sept 6 (Reuters) - Macquarie Group Ltd warned on Monday its first half net profit will fall by a quarter, rattling investors who were expecting a rise, sending its shares down as much as 8 percent to a 15-month low.

Macquarie, Australia's top investment bank, said weak global markets were battering its key units, including trading and advisory businesses, that accounts for nearly three-quarters of its revenue.

Macquarie's struggles are not unique to the investment banking community but its outlook is a tad weaker than that of its larger global rivals, like Goldman Sachs, Morgan Stanley and investment bank units of JPMorgan and Credit Suisse

"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."

At 0041 GMT, Macquarie shares were down 5.9 percent at A$34.85 in a broadly flat overall market

Macquarie's prediction for a 25 percent first half profit fall compares with expectations for 10.6 percent rise. Its forecast that 2011 full-year profit would be in line with the previous year is also worse than expectations for 14.3 percent rise.

Macquarie shares are down 28 percent so far this year and the stock has recorded just 3 annual falls in the past 14 years.

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 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. Its huge workforce and high pays that earned it the nickname "millionaires' factory" are adding to the pain.

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 forecast.

But this is the first time it gave a specific forecast and analysts are expected to slash forecast once again. (Reporting by Narayanan Somasundaram; Editing by Ed Davies and Balazs Koranyi)

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