Nov. 18 (Bloomberg) -- Macquarie Group Ltd., Australia's biggest securities firm, posted a 43 percent drop in profit after writing down the value of assets battered by the global financial crisis.

Net income fell to A$604 million ($392 million) in the six months ended Sept. 30, from a record A$1.06 billion a year earlier, the Sydney-based bank said in a statement today. That beat the A$592.4 million average estimate of five analysts surveyed by Bloomberg.

Nicholas Moore, who took over from Allan Moss as chief executive officer in May, forecast a second-half profit ``broadly in-line with the first-half result'' and estimated further writedowns of about A$400 million on listed funds. Macquarie's shares have lost 70 percent this year as Moore, 50, predicted tumbling financial markets would put an end to a 16- year streak of rising annual profits.

``In this environment it's impossible to accurately forecast where this company's business is going,'' Donald Williams, chief investment officer at Sydney-based Platypus Asset Management Ltd., which oversees the equivalent of about $768 million, said before the report. ``That's why there's so much riding on the company's own assessment.''

Macquarie's shares rose 11 percent to A$22.80 at 10:08 a.m. in Sydney, reversing a 9.4 percent decline yesterday to a six- year low. The firm's shares trade at 4.9 times estimated full- year earnings, compared with a 10-year average multiple of more than 18 times.

`It's Cheap'

``The shares have been hammered with everyone else,'' said Platypus's Williams, who sold all his Macquarie stock this year. ``By all measures it's cheap, but it's a brave move to buy back in under these circumstances.''

Investors have sold the stock amid the fallout from the credit crunch, which has cost the world's biggest financial companies almost $1 trillion in writedowns and losses.

While Macquarie avoided the subprime mortgage investments that sank Bear Stearns Cos. and Lehman Brothers Holdings Inc. and caused losses at Citigroup Inc. and UBS AG, it hasn't been immune to the slump in equities markets and the global recession.

Writedowns and one-off costs totaled A$1.14 billion in the first half, and cut profit by A$395 million, the company said. Net impaired assets were A$592 million, from A$149 million a year ago as Macquarie's investment funds slumped and the company sold its Italian mortgages portfolio at a loss.

Shares of Macquarie Infrastructure Group, the world's biggest owner of toll roads, and Macquarie Airports have both slumped more than 50 percent this year.

Liquid Assets

Moody's Investors Service last month cut its long-term outlook for Macquarie's credit rating to negative, even after Moore boosted cash holdings as a buffer against the credit crisis. Moore said today that liquid assets stand at A$26.3 billion, exceeding the company's A$18.8 billion of short-term wholesale funding.

Operating income fell 37 percent to A$2.97 billion. The expense-to-income ratio, a measure of profitability, rose to 75.5 percent from 70.8 percent a year ago.

Macquarie last month agreed to sell the Italian mortgages business. A month earlier it said it would sell its Australian investment lending business to cut businesses that rely on wholesale funding markets. The sale of the unit, a provider of investment funding including margin loans, followed Macquarie's decision in March to wind back its Australian mortgage business.

Fee Income

Macquarie's fee income declined 13 percent to A$2.2 billion in the first half as it advised on 164 transactions valued at about A$83 billion. Net trading income fell 14 percent to A$722 million, while earnings from asset and equity investments slid 43 percent to A$479 million.

Allco Finance Group and Babcock & Brown Ltd., which copied Macquarie's model of using debt to buy infrastructure assets for its funds, faced pressure from bankers to sell assets this year. Allco was placed in the hands of outside managers this month, while analysts including ABN Amro Holdings NV's John Heagerty say Babcock may breach debt covenants as it struggles to offload investments.

Macquarie and its 38 listed and unlisted funds have a combined A$167 billion of debt, according to Credit Suisse Group. The company has expanded with a debt-fueled strategy of scouring the world for assets and bundling them into funds.

Still, Fitch Ratings on Oct. 8 reaffirmed its stable outlook for Macquarie and called its fundamentals ``solid'' as the company responded early to the global credit crisis by increasing cash levels to A$20 billion.

Macquarie will pay a dividend of A$1.45 a share, unchanged from a year earlier.

To contact the reporter for this story: Stuart Kelly in Sydney skelly22@bloomberg.net

Last Updated: November 17, 2008 18:27 EST