Weak market hits outlook at Macquarie

City A.M. Reporter
AUSTRALIA’S top investment bank Macquarie Group has lowered the profit outlook for key divisions that account for close to half of its earnings, hurt by weak markets.

However, Macquarie reaffirmed expectations of stronger earnings for the year to March 2012 on growth in its funds-management unit, and corporate and asset finance business.

The bank said its trading and investment banking units had faced difficult conditions in August and the outlook for the year was based on the assumption that markets would improve.

Macquarie has seen its annual profits fall in two of the last three years as it moved more towards traditional investment banking after the financial crisis, shifting from a business model of buying and pooling of assets, listing them and charging fees for managing.

With its marquee investment bank and trading business struggling, Macquarie is bulking up its annuity-style businesses such as lending, corporate and asset finance to diversify revenue and sidestep market volatility.

Some fund managers and analysts were not convinced of the company’s earnings outlook for the year.

“We still see their FY12 guidance as a risk as they are leaving it to the end of the year to catch up,” said Ben Lyons, a fund manager at ATI Asset Management.

“There is a lower degree of transparency in their earnings.”

ATI has sold its Macquarie holding in the last few months and Lyons said the fund manager would continue to avoid it.

Macquarie shares closed up 1.6 per cent yesterday, in line with the market. They have fallen 37.5 per cent so far this year.