Macquarie gives upbeat market update

The world’s largest manager of infrastructure assets says it expects its half-year profit to grow even as Macquarie Capital, its investment banking division, continues to show weak results.

Australia’s Macquarie Group, the world’s largest infrastructure asset manager, today issued an upbeat market update for the first quarter of its 2010 fiscal year even as its investment banking arm, Macquarie Capital, continued to show weak results.

Addressing shareholders gathered at the firm’s annual general meeting in Sydney, Macquarie chief executive officer Nicholas Moore said all the firm’s operating businesses experienced improved performance in the three months ending in June 2009 except Macquarie Capital.

Macquarie Capital is a very lumpy business with large transactions closing at odd times

Nicholas Moore

“With Macquarie Capital, that’s largely down to the timing of large transactions and their size. As you know, Macquarie Capital is a very lumpy business with large transactions closing at odd times,” Moore told shareholders.

Much of the firm’s advisory business – almost one third by total deal value, according to the latest full-year results – is in the infrastructure sector.

Moore hinted that Macquarie may be looking to diversify the business globally. He said the firm is undertaking initiatives aimed at turning Macquarie Capital into “a very strong global investment banking group”, with particular focus on the United States and Europe as growth areas. He also said the firm sees a “whole lot of new fund activities and a whole of new fund opportunities” in those regions.

However, Moore continued to play down the importance of the firm’s specialist listed funds business, which in prior years has been an increasing source of profitability for the firm but has, since the outbreak of the global financial crisis, proved to be an increasing headache as many of its managed funds’ share prices plummeted.

“A lot of people outside Australia know Macquarie particularly for our specialist funds business but, of course, it’s only 13 percent of our business last year,” Moore said.

In March, Macquarie issued market guidance saying the business would account for approximately 5 percent of its income for the full 2009 fiscal year.

Moore reiterated the firm has a variety of initiatives under way across its listed specialist funds, many of which are infrastructure-focused, to close the gap between their security values and their underlying net asset values. The gap has been a source of “frustration” for Macquarie, he said. Moore praised in particular recently agreed acquisition of the Macquarie Infrastructure Communications Group by the Canada Pension Plan Investment Board for A$1.64 billion (€940 million; $1.3 billion) as a “very satisfactory outcome”.

Moore said confidence is returning to the markets and credit markets have showed signs of “thawing”.

Macquarie expects to see profit for the next six months to 30 September 2009 to be approximately mid-way between the profits reported for the first half and the second half of its previous financial year.

Macquarie reported profits of A$604 million for the first half of the year, A$267 million for the second half of its 2009 financial year.