Macquarie investors may need to brace for disappointment
(7 July 2011 – Australia) Investors have grown concerned as Australian bank, Macquarie Group struggles to regain ground lost.
Since 2009, the Australian bank has spent at least US$2.4 billion (A$2.24 billion) buying assets in the US, Canada and Europe, building up its exposure to businesses such as stock trading, asset management and aircraft leasing.
The new initiatives appear to have come at a cost. Macquarie has lost ground in some of its old core businesses.
In Australia, Macquarie had nabbed one of the top three spots in the rankings for advising on mergers and acquisitions for each of the past six years, according to Dealogic.
Before the 2008 global financial crisis, Macquarie had made a name for itself by using cheap debt to buy infrastructure assets that it sold to funds the bank managed, and made fees from.
One factor hampering Macquarie is that its bonuses are partly tied to returns on equity, something other banks don't do.
Its bonus policies make Macquarie more like a European bank when US rivals, which give a bigger weighting to cash, are its key competitors in most markets, the analyst said.
Chief financial officer Greg Ward said the hiring frenzy in the Asian investment-banking market was starting to moderate. That could help the bank retain more staff.
Some in the market worry Macquarie's management is going to cut the group's profit outlook, which it has done during two of the past three financial years.
Macquarie has previously said only that profits will be higher this year than in the last financial year, based on improvements in the two businesses most tied to the equities and M&A markets: Macquarie Securities and Macquarie Capital.
The new initiatives appear to have come at a cost. Macquarie has lost ground in some of its old core businesses.
In Australia, Macquarie had nabbed one of the top three spots in the rankings for advising on mergers and acquisitions for each of the past six years, according to Dealogic.
Before the 2008 global financial crisis, Macquarie had made a name for itself by using cheap debt to buy infrastructure assets that it sold to funds the bank managed, and made fees from.
One factor hampering Macquarie is that its bonuses are partly tied to returns on equity, something other banks don't do.
Its bonus policies make Macquarie more like a European bank when US rivals, which give a bigger weighting to cash, are its key competitors in most markets, the analyst said.
Chief financial officer Greg Ward said the hiring frenzy in the Asian investment-banking market was starting to moderate. That could help the bank retain more staff.
Some in the market worry Macquarie's management is going to cut the group's profit outlook, which it has done during two of the past three financial years.
Macquarie has previously said only that profits will be higher this year than in the last financial year, based on improvements in the two businesses most tied to the equities and M&A markets: Macquarie Securities and Macquarie Capital.
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