Investors fly high on Macquarie share plan
In the September half, Macquarie lifted its net profit 39 per cent to $501 million amid benign conditions in global financial markets.
The move to give shareholders one share in Sydney Airport for each share held in the bank - even though this may reduce prospects of a takeover for the airport operator in the near term - pushed the bank's shares up 4 per cent to $53.01, although shares in Sydney Airport fell 2.9 per cent to close at $4.07.
Macquarie had been expected to engineer a takeover for the airport company to get a premium for its 20 per cent stake.
"I'm sure they canvassed all options," BBY analyst Brett Le Mesurier said of the holding in the airport owner. "This a great outcome for Macquarie Bank shareholders."
The bank's chief executive, Nicholas Moore, said Macquarie had received interest from investors seeking to buy its stake in the airport "for some time now".
The bank's munificence comes as it has also lifted the interim dividend to $1 a share, from 75¢ paid a year earlier, reflecting its buoyant trading conditions.
The bank remained careful of forecasting the outlook for the balance of the financial year, saying only that subject to market volatility, it expects the second-half profit to exceed the profit posted in the first half.
"Its earnings are very highly correlated with [financial] markets," Mr Le Mesurier said. "It won't return to its glory days."
Difficult conditions in metals and commodity markets resulted in additional write-downs in this division, Macquarie said, although it defended its exposure by saying these activities were cyclical. In total, investment impairments fell to $82 million from $168 million, with loan impairments falling more modestly, to $95 million from $101 million.
Bank officials were defensive when discussing Macquarie's rising volume of mortgage lending, pointing out there has been no decline in lending standards. Borrowers are far more conservative than in the past, the bank told analysts, with no "low-doc lending", while borrowers are quick to switch to fixed-rate loans.
The bank has looked at loan serviceability of borrowers, should interest rates rise. "We're funding more out of [retail] deposits," one official told analysts. "We still securitise [mortgage loans] but that market is still coming back slowly. But with so much deposits we're using that [to fund mortgage lending]."
Analysts were also wary since Macquarie could not explain why its tax rate had risen so steeply.
Mr Moore said several years ago it had a highly profitable securities trading operation in Hong Kong, a low tax regime, but this operation was now losing money.
Similarly, the bank now has a sizeable US trading and infrastructure business, which has a tax liability in what is a comparatively high-tax regime.
Frequently Asked Questions about this Article…
Macquarie Bank's decision to give shareholders its $1.4 billion stake in Sydney Airport has pushed the bank's shares to a four-year high.
Macquarie Bank's decision to give shareholders its $1.4 billion stake in Sydney Airport has pushed the bank's shares to a four-year high.
In the September half, Macquarie Bank increased its net profit by 39% to $501 million, benefiting from favorable conditions in global financial markets.
In the September half, Macquarie Bank increased its net profit by 39% to $501 million, benefiting from favorable conditions in global financial markets.
While Macquarie's shares rose by 4% due to the share plan, Sydney Airport's shares fell by 2.9%.
While Macquarie Bank's shares rose by 4% due to the share plan, Sydney Airport's shares fell by 2.9%.
Macquarie Bank had considered a takeover to get a premium for its 20% stake but opted to distribute shares to its shareholders instead.
Macquarie Bank was expected to pursue a takeover for a premium on its 20% stake, but instead opted to distribute shares to its shareholders, which was seen as a favorable outcome for them.
Macquarie Bank increased its interim dividend to $1 per share, up from 75 cents a year earlier, reflecting strong trading conditions.
Macquarie Bank has increased its interim dividend to $1 per share, up from 75 cents a year earlier, reflecting strong trading conditions.
Macquarie Bank maintains high lending standards, with no 'low-doc lending,' and borrowers are more conservative, often switching to fixed-rate loans.
Macquarie Bank is maintaining high lending standards, with borrowers being more conservative and quick to switch to fixed-rate loans. The bank is also funding more from retail deposits.
Macquarie Bank's trading operations in Hong Kong, once highly profitable, are now losing money, and its US trading business faces high tax liabilities.
Macquarie Bank's trading operations in Hong Kong, once highly profitable, are now losing money, and its US trading and infrastructure business faces a high tax liability.
Macquarie Bank is focusing on loan serviceability and funding more from retail deposits to manage potential interest rate increases.
Macquarie Bank expects its second-half profit to exceed the first half, although it remains cautious due to potential market volatility.
Call 1300 880 160
Start a chat
Schedule a call
