01/05/2009 - 10:35

Macquarie Group annual profit slumps 52%

01/05/2009 - 10:35


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Macquarie Group has posted a 52 per cent fall in annual profit - its first decline in 17 years - as chief executive Nicholas Moore takes a hefty 99 per cent pay cut.

Macquarie Group annual profit slumps 52%

Macquarie Group has posted a 52 per cent fall in annual profit - its first decline in 17 years - as chief executive Nicholas Moore takes a hefty 99 per cent pay cut.

Australia's biggest investment bank booked $2.5 billion in asset and loan writedowns in fiscal 2009, which pushed its full year net profit down to $871 million, from $1.8 billion a year earlier.

But the Sydney-based bank said its results for fiscal 2010 are likely to be see fewer writedowns and provisions, even though market conditions are likely to remain challenging.

Macquarie's full year result was in line with its guidance for profit to halve to about $900 million.

Mr Moore said tough conditions in financial markets meant it was hard to make short term forecasts.

"While there were some early signs of markets stabilising in March and April, significant uncertainties remain and it is still too early to make any judgements on sustained market improvements," he said in a statement on Friday.

The bank's balance sheet in 2010 would see a decrease in cash balances, equity investments maintained at or below existing levels and lower investment levels in listed funds.

Macquarie, which is yet to announce details of a capital raising flagged on Thursday, was maintaining a cautious stance with a conservative approach to funding and capital, Mr Moore said.

Macquarie shares are currently in a trading halt, having last closed at a near six-month high $33.48 on Thursday.

Market sources say the group is expected to raise about $500 million in new shares to be sold at a deep discount of around 19 per cent.

"We are not discussing any capital raisings here today for regulatory purposes," Mr Moore said in a presentation to analysts.

Macquarie declared a final dividend of 40 cents per share, down from $2 in the same period in fiscal 2008, taking the total payout for the fiscal 2009 year to $1.85.

"Macquarie has remained profitable despite a year of challenging global market conditions," Mr Moore said.

"The year's result was marked by a significant number of one-off items resulting from these market conditions."

Group full year operating income slumped 33 per cent to $5.53 billion.

The writedowns related to the sale of its Italian mortgages business, impairments on funds management assets and other co-investments, loan impairments and impairments recognised on trading asset positions.

The real estate division recorded a loss of $356 million in the year ended March 31, due to property value writedowns and provisions on investments and loans.

The banking division made a loss of $99 million, after being hit by the sale of the Italian mortgages business.

Employment expenses fell 44 per cent as bonuses were cut and staff numbers declined to 12,700, from 13,000, as the bank withdrew from some businesses and divisions adjusted staffing levels.

Macquarie had cash and liquid assets of $30.3 billion at March 31, up from $20.8 billion the year before.

The bank's capital level was $10.2 billion, $3.1 billion above the regulated minimum requirement.

Macquarie's return on equity was 9.9 per cent, compared with 23.7 per cent the year before.

Of the remaining divisions, Macquarie Capital, Treasury and Commodities, Macquarie Securities, Macquarie Funds and Corporate and Asset Finance contributed less to group profit compared to the year before.

Treasury and commodities was the least effected by the financial crisis, with profit falling 15 per cent to $509 million as market volatility in commodities and foreign exchange increased trading volumes.

Macquarie Capital's profit slumped 89 per cent to $251 million due to writedowns in co-investments in listed funds.

Macquarie Securities made $275 million, down 77 per cent, as equity markets slumped.

Profits at its funds and corporate and asset finance unit declined to $45 million and $66 million respectively as fees and asset sales declined.

Meanwhile, Mr Moore took a hit on his full year payout, after his bonuses and profit share was cut.

His annual remuneration for fiscal 2009 totalled $290,756, down from $26.75 million in the previous year, although the amount was skewed by deductions in the long term benefits line involving share allocations.

His full year cash salary remained around $517,600 but the short term performance related component fell to $2.12 million, from $18.73 million in fiscal 2008.

Macquarie's annual report, also released on Friday, showed that the total remuneration paid to its key executive managers fell to $11.36 million in fiscal 2009, from $124.75 million in the previous year.




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