Macquarie Bank Ltd., Australia's largest securities firm, forecast first-half net income will rise at least 40 percent to a record A$675 million ($509 million) after selling assets and paying less tax.
The bank raised A$733 million from the sale of its 7.7 percent stake in property trust Macquarie Goodman Group last month, booking a profit of A$90 million. Earnings will depend on market conditions and completing major deals, Richard Sheppard, the bank's deputy managing director, said in a statement today.
Macquarie Bank has said it's in talks to sell A$1.3 billion of assets into investment funds, without saying how much will be sold in the six months to Sept. 30. The Sydney-based bank has achieved 14 straight years of record annual profit by bundling A$88 billion of assets, such as toll roads and airports, into funds it sells to investors and manages for a fee.
``The fact they are getting income up at those levels without the additional asset sales is a positive,'' said Atul Lele, who helps manage $270 million at White Funds Management in Sydney, including Macquarie stock. ``The bank's comments about further asset sales augur well for the full-year earnings.''
Profit for the 12 months ending March 31 will beat the A$916 million posted a year earlier, Sheppard said. The median estimate of eight analysts surveyed by Thomson Financial is for Macquarie to report full-year net profit of A$1.2 billion.
Macquarie Bank reports first-half earnings on Nov. 14.
Excluding the Macquarie Goodman sale, first-half profit will rise at least 20 percent, Sheppard said ahead of meetings with investors in the U.S., Canada and Scotland this week.
Lower Tax Rate
He also said all of the bank's units would report higher earnings in the half. Macquarie, Australia's biggest investment bank, reported net income of A$482 million in the six months ended Sept. 30, 2005.
Sheppard said the bank's tax rate is expected to be lower in the first half than a year earlier because more of its earnings are derived offshore. Macquarie's international income jumped 59 percent to A$2 billion in the year to March 31.
The bank, which paid a tax rate of 24 percent in fiscal 2006, may pay less than 20 percent tax this year, Goldman Sachs JBWere Pty analyst Ben Koo said in a note this evening.
``Market conditions have held up well during the period,'' Sheppard said. First-half earnings will benefit from the sale of the bank's stake in Macquarie Goodman and selling shares in Dyno Nobel Ltd., the world's No. 2 explosives maker, he said.
The bank and its partners raised A$1.1 billion selling shares in Dyno Nobel in April and listing the business on the Australian Stock Exchange. Macquarie led a group in buying Oslo-based Dyno Nobel for $1.7 billion in September, selling the company's European, African and Latin American operations to Orica Ltd., the world's biggest explosives company, for $685 million as part of the deal.
Assets the bank plans to sell include luggage trolley business Smart Carte Corp, bought for $270 million in January, and Stagecoach Group Plc's London bus operation, acquired for 263.5 million pounds ($494 million) in June.
Macquarie has previously said it raised A$16.3 billion for its infrastructure and property funds in the 15 months to June 2006, more than half of which was raised from international investors. In July, the bank said it did not expect performance fees earned from its funds beating their respective benchmarks to be material this year.
New Holding Company
Macquarie expects to make a submission to the Australian Prudential Regulation Authority by the end of the month on its proposal to form a new holding company owning both banking and non-banking units.
The bank wants to split its operations as growth in its international and non-banking income outpaces traditional banking businesses. As a bank supervised by the authority, Macquarie must hold regulatory capital to protect depositors' funds.
Macquarie is seeking to reduce this burden by folding its non-banking business into a subsidiary not regulated by APRA. The bank expected to provide further information about the restructure to investors in November, Sheppard said.