May 1, 2009
By MERAIAH FOLEY
Macquarie Posts Decline in Annual Profit
SYDNEY — The largest Australian investment bank, Macquarie Group, posted its first fall in annual profit in 17 years Thursday, citing billions of dollars in losses stemming from the global slowdown.
Macquarie said net profit for the year that ended March 31 had fallen 52 percent to 871 million Australian dollars, or $635 million, from a record 1.8 billion dollars the year before. The widely expected result fell just short of the bank’s February profit forecast of 900 million dollars.
Later in the day, the bank confirmed it had raised 540 million dollars in an institutional placement of new shares at 27 dollars per share, Reuters reported.
Though Macquarie and other large Australian banks have been largely insulated from the pain suffered by their counterparts on Wall Street and in Europe, the result released Friday was the investment juggernaut’s worst since 1992, during the country’s previous recession.
Macquarie blamed “testing global market conditions” for the result, which included 2.5 billion dollars in one-time losses. Listed among the write-downs were 1.47 billion dollars in losses associated with managed funds and infrastructure assets; 496 million dollars in bad loans, mostly for property and mineral investments; and 248 million dollars in costs from the sale of its Italian mortgage business.
On the upside, Macquarie touted its relatively healthy balance sheet, with cash and liquid assets totaling 30.8 billion dollars and total capital of 10.2 billion dollars, which is 3.1 billion dollars more than the minimum required by Australian regulators.
Nevertheless, the bank requested Thursday that trading in its shares be halted while it considered plans to raise additional capital. There were no further details of the plans in the bank’s statement to the Australian Securities Exchange on Friday, but the Macquarie chief executive, Nicholas Moore, warned of continued uncertainty ahead.
“While there were some early signs of markets stabilizing in March and April,” Mr. Moore said, “significant uncertainties remain, and it is still too early to make any judgments on sustained market improvements.”
Until now, Macquarie has been one of the few banks around the globe that have not approached its shareholders for more money since the financial meltdown began last year.
Tim Schroeders, a portfolio manager at Pengana Capital, said that the announcement made Thursday was more of a reflection of changing banking conditions than a sign of trouble at Macquarie.
“The leverage that was previously in the banking system prior to the global financial crisis is no longer prudent, and as a result, banks are requiring more capital and returning less on that capital,” he said. “There are going to be adjustments required to reposition the business to be optimally profitable over the next 10 years.”
Read more in the New York Times
