John Kehoe and Andrew White 27 April 2012
Investment bank Macquarie Group has posted a 24 per cent fall in net profit to $730 million in a year in which it slashed 1300 jobs as difficult economic conditions took a toll on its market-facing businesses.
Despite the poor result, Macquarie confounded sceptics by confirming that it had gained regulatory approval to start a $500 million share buyback. The buyback has been scaled down from the $800 million announced last year, but Macquarie still intends to pursue this larger capital management strategy later in the year.
Group managing director Nicholas Moore’s remuneration fell to $7.79 million, down from $8.69 million.
Shemara Wikramanayake, the head of Macquarie’s best-performing division Macquarie Funds, was the only group executive to receive a pay rise. Her remuneration was almost as much as Mr Moore’s, rising to $7.36 million from $5.62 million.
Analysts’ expectations had centred on a net profit after tax of $720 million for the 12 months to March 31, based on guidance given by the company in February that its full-year result would be 25 per cent lower than last year.
Macquarie expects a better result in 2013, providing market conditions do not deteriorate.
The result included a stronger second half, with net profit up 39 per cent to $425 million following a 22 per cent increase in profits from annuity-style businesses such as funds management and a rebound in the fixed interest, currencies and commodities business unit.
Operating income fell 9 per cent in the year to March 31 due to lower levels of client activity in capital markets businesses caused by global economic uncertainty.
Macquarie stripped $491 million from expenses, which fell 8 per cent, including job cuts across securities, investment banking, technology and back office roles.
Staff numbers fell 1354, or 9 per cent, to 14,202. In the six months to March 31, 706 jobs were lost in Macquarie’s corporate division, which includes information technology, operations and back office roles.
Macquarie Securities, which shut down loss-making derivatives businesses overseas, shed 581 staff over the year. Macquarie Capital lost 182 staff.
Macquarie deputy chief executive Greg Ward said the bulk of the staff cuts had now been undertaken, but business managers would continue to refine their staffing needs
Mr Moore said there had been substantially lower levels of client activity in many of the capital markets-facing businesses in the year to March 31 due to global economic uncertainty, which was partly offset by the ongoing growth of annuity style businesses.
“Macquarie’s annuity style businesses, particularly Macquarie Funds Group and Corporate and Asset Finance Group, continued to deliver strong results reflecting the investment that has been made in these businesses over many years, as well as the benefits of recent acquisitions,’’ Mr Moore said in a statement.
“Difficult market conditions impacted the performance of Macquarie’s capital markets-facing businesses. Macquarie Securities Group experienced a fall in cash and derivatives revenues and exited a number of underperforming businesses globally, recording a loss for the year. Macquarie Capital reported significantly lower results due to low levels of client activity across mergers and acquisitions (M&A) and equity capital markets (ECM).
“The result for FICC, though marginally down on the prior year, benefited from improved sentiment in many FICC markets during the six months to 31 March 2012, leading to a significant turnaround in the second half.”
Macquarie declared an unfranked final dividend of 75¢ a share, taking its payout to $1.40 unfranked for the year, down from $1.86 previously.
The Australian Financial Review