01 February 2006
Macquarie Bank Managing Director and Chief Executive Officer Allan Moss said today he expects the Bank's full year profit for the year ended 31 March 2006 to be slightly up on the record profit of $823 million for the prior corresponding period, despite the fact that last year's profit included a $91 million one off gain from the formation of the Macquarie Goodman Group.
Speaking at a briefing on the Bank's operations to investors and analysts, Mr Moss said all the Bank's major operating groups are performing well. As the Bank foreshadowed at the interim result, there will be no significant performance fees from listed specialist funds in 2H06[i]. "However, the deal pipeline continues to be satisfactory overall, including investment banking and equity capital markets," he said.
Mr Moss re-iterated that there remains some possible upside from specialist fund initiatives and asset realisations for the current half, as was also foreshadowed in the Bank's interim result. In this regard, the timing of a few large transactions will have an effect on the full year result.
"The Bank has continued to invest in staff throughout the year. Bank staff now total more than 7,600, up 16 per cent from March 2005, while our staff numbers in international locations have increased 32 per cent to more than 2,300," Mr Moss said.
Mr Moss added that the broking businesses continue to experience good domestic and international equity market conditions. However, for the Equity Markets Group, the exceptional trading conditions in key markets in the six months to 30 September 2005 have not been repeated in 2H06. Domestic volumes have remained flat, while volumes in Hong Kong have declined from the highs of September 2005.
"The current half has benefited from many major transactions, a solid flow of initial public offerings (IPO) and new issuance market activity. However, during the period there have been no large oil and gas realisations. In the Australian property market, residential property is starting to stabilise after a two-year downturn, the retail property market is moderating from exceptionally high levels, while office property is in an upswing phase," he said.
In commenting on the Bank's business Groups for the half to date, Mr Moss said:
The Investment Banking Group expects its second half profit to be significantly lower in 2H06 than 1H06[ii] and 2H05[iii], due to the absence of significant performance fees. The underlying business continues to perform strongly, with growth in staff, offices in international locations, and equity under management. Overall the full year result is expected to be up on the prior corresponding period.
The Treasury and Commodities Group expects the 2H06 to be well down on a very strong 1H06. There were strong results across all divisions and the US energy and commodities business continues to grow. Overall, the full year result is expected to be up on the prior corresponding period.
The Banking and Property Group expects 2H06 to be up on 1H06 with all major businesses performing well. The Australian mortgages business is experiencing very strong market share growth and there has been substantial growth in property funds under management. However, the investment in new businesses has limited profit growth for the Group in the current year. Overall, the full year result is expected to be up on the prior corresponding period (excluding the one off gain from the formation of the Macquarie Goodman Group).
The Equity Markets Group expects its 2H06 result to be down substantially relative to 1H06 due to poor trading conditions in Hong Kong, and quieter second half market conditions in Australia and South Africa. Overall, however, the full year result is expected to be well up on the prior corresponding period.
The Financial Services Group expects its 2H06 to be down relative to 1H06, due to seasonality, deal flow and increased investment in businesses in 2H06. Overall, the full year result is expected to be up significantly on the prior corresponding period.
The Funds Management Group expects 2H06 result to be marginally ahead of 1H06 and overall, the full year result to be up on the prior corresponding period.
Specialist funds/co-investment syndicates
Mr Moss said the short to medium term environment for the Macquarie Bank Group's specialist funds and co-investment syndicates is still reasonable. The sale of seed assets and Macquarie Bank Group investments in Macquarie managed funds continued in calendar year 2005, as evidenced by the listing of the Macquarie Media Group on the Australian Stock Exchange and the Macquarie International Infrastructure Fund on the Singapore Stock Exchange.
However, there has been some softening in markets such as Singapore, where the IPO of the Macquarie International Real Estate Fund was postponed.
"Broadly, soundings with investors indicate a continuing interest and appetite for new products", Mr Moss said.
"The Bank is expected to continue with the sale of substantial seed assets in the calendar year 2006, including the potential for the creation of new specialist funds in Europe, Asia and North America."
Mr Moss said as a result of strong deal flow, the Bank expects its Tier 1 capital ratio could be down at 31 March 2006 from the levels of 30 September 2005, but the Bank will remain conservatively capitalised.
The Bank expects to announce its full year results on Tuesday May 16, 2006.
[i]2H06 for the six month period ending 31 March 2006
[ii]1H06 for the six month period ended 30 September 2005
[iii]2H05 for the six month period ended 31 March 2005
For further information please contact:
Chief Financial Officer
Macquarie Bank Limited
Tel: (612) 8232 3543
Macquarie Bank Limited
Tel: (612) 8232 5008
Mobile: (614) 1302 6309
Macquarie Bank Limited
Tel: (612) 8232 4102
Mobile: (614) 1069 9532