Stephen McMahon news.com.au October 26, 2012
A JUMP in returns from currency trading and the mining sector has lifted the nation's largest investment bank Macquarie Group's first half profits by 18 per cent to $361 million.
The axing of almost 800 jobs in the past 12 months also helped the bank boost its profit levels after a lacklustre few years, buoying investors with the stock up 3 per cent in early trading.
But Macquarie chief executive Nicholas Moore is cautious about the outlook as markets remains subdued with M&A activity down 15 per cent.
"We continue to expect an improved result in 2013 provided market conditions are not worse than those experienced last year,'' he said.
Data compiled by Bloomberg shows the lacklustre takeover marker is set for its slowest year since 2009.
This slowdown in M&A activity has seen a greater focus on the bank's traditionally smaller units with fixed income, currency and commodity trading units reporting a profit of $219 million up from a measly $6 million for the same period last year.
The group's capital business was impacted by low levels of merger and acquisition activity, and its income in the period to September was down 15 per cent from the previous corresponding period.
Macquarie's securities unit also reported a loss of $64 million - much bigger than the $19 million loss for the same period last year but smaller than the whopping $175 million loss for the second-half of the financial year 2011-12.
Activity remained low because of weak investor confidence due to Europe's sovereign debt issues and concerns about China's growth, Macquarie said.
City Index market analyst Peter Esho said the result is reasonable but lacks an upward surprise.
"It's hard to see from these numbers how market consensus estimates for full year earnings will be reached,'' he said.
The weak financial conditions were also reflected by a 5 per cent drop in the bank's operating income in the six months to September, to $3.08 billion.
But the group reduced its costs by $254 million from a year ago, to $2.2 billion, included axing 739 staff, to 13,463.
Macquarie declared an unfranked dividend of 75c per share, up from 65c at the same time in 2011.