Macquarie First-Half Profit Rises 18% on Trading Businesses

Macquarie CEO Nicholas Moore
Nicholas Moore, chief executive officer of Macquarie Group Ltd. Photographer: Ian Waldie/Bloomberg

Macquarie Group Ltd., Australia’s largest investment bank, said first-half profit rose 18 percent from a year earlier on increased earnings from its fixed income, currency and commodity trading business.

Net income advanced in the six months to Sept. 30 to A$361 million ($374 million), versus the median estimate of five analysts for A$371.8 million. The Sydney-based bank repeated a forecast that the group’s full-year result will improve from the prior 12 months, provided markets don’t worsen.

Chief Executive Officer Nicholas Moore has joined banks including UBS AG and Credit Suisse Group AG in cutting jobs as trading and merger and acquisitions fees dwindled, Europe’s debt crisis roiled markets and China’s economic growth slowed. In Australia, dealmaking is set for its slowest year since 2009, according to data compiled by Bloomberg.

“Macquarie’s numbers are reasonable considering market circumstances,” said Peter Esho, chief market analyst at City Index Ltd. in Sydney. “Macquarie is doing its best to cut costs and this is helping the bottom line.”

The bank’s fixed income, currency and commodity trading unit reported profit of A$219 million in the half, from A$6 million in the same period a year earlier, it said. Commodities trading rose 21 percent from a year earlier, underpinned by energy and agricultural products, Chief Financial Officer Patrick Upfold said on a conference call.

Surplus Capital

Macquarie’s shares added 3.5 percent to A$30.85 at the close of Sydney trading, taking this year’s gain to 30 percent, beating the 10 percent advance of the S&P/ASX 200 Index. Macquarie has purchased A$251 million of its own stock under a A$500 million buyback program, paying an average of A$25.58, it said today.

The group has “billions” in surplus capital and would consider acquisitions across all geographies while its region-specific funds in areas including Korea, the Philippines, Mexico, India and Russia will also consider purchases, Moore said in a telephone interview.

“We have looked at acquisitions in the past and we will continue to look at them,” Moore said.

Macquarie’s securities unit reported a loss of A$64 million, wider than the A$19 million loss a year earlier as Australian equity capital markets activity dropped 46 percent in the period, the firm said. Macquarie Capital, which advises clients on mergers and capital markets, reported a profit of A$10 million after advising on 205 transactions valued at A$36 billion.

More Confidence

While the two units continue to be impacted by subdued market conditions, “there is more confidence out there than there was 12 months ago,” Moore said in the interview.

The contribution from Macquarie’s funds unit dropped 11 percent to A$356 million from a year earlier while its banking and financial services division reported a 28 percent gain to A$185 million.

Staff numbers were at 13,463 at Sept. 30, down from 14,202 at March 31, the bank said. Operating expenses dropped 9 percent from a year earlier and 17 percent from the prior half.

Based on today’s results, analyst consensus forecasts for Macquarie’s full-year profit is “too high”, said Victor German, an analyst at Nomura Australia Ltd. in Sydney. Macquarie may report profit for this financial year of A$844 million, according to the median estimate of nine analysts.

“Nobody really doubts Macquarie will improve on its 2012 performance, but the big question is by how much?” German said.

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