MacBank's open hand puts wings on stocks
In the September half, Macquarie lifted its net profit by a hefty 39 per cent to $501 million amid benign conditions in global financial markets.
The surprise 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 ahead 4.2 per cent to $53.10, although shares in Sydney Airport shed 4 per cent to $4.04.
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 lifts the interim dividend to $1 a share, from 75¢ 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 metal 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 declining more modestly, to $95 million from $101 million.
Bank officials were defensive when discussing Macquarie's rising volume of mortgage lending, pointing out there had been no decline in lending standards.
Borrowers were far more conservative than in the past, the bank told analysts, with no "low-doc lending", while borrowers were 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 in 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 that 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.
Following Macquarie Bank's decision, shares in Sydney Airport fell by 4% to $4.04.
While Macquarie Bank's shares rose, Sydney Airport's shares fell by 4% to $4.04 following the announcement.
Macquarie Bank decided to distribute its stake in Sydney Airport to shareholders as a strategic move, despite it potentially reducing the prospects of a takeover for the airport operator in the near term.
Macquarie Bank chose to distribute its stake in Sydney Airport to shareholders despite reducing takeover prospects, as it had received interest from investors wanting to buy its stake.
Macquarie Bank has increased its interim dividend to $1 per share, up from 75 cents a year earlier, reflecting its strong trading conditions.
Macquarie Bank increased its interim dividend to $1 per share, up from 75 cents a year earlier, reflecting strong trading conditions.
Macquarie Bank is managing its mortgage lending by ensuring no decline in lending standards, with borrowers being more conservative and quick to switch to fixed-rate loans.
Macquarie Bank has maintained lending standards, with borrowers being more conservative and quick to switch to fixed-rate loans. The bank is funding more from retail deposits.
Macquarie Bank is facing challenges in its trading operations, particularly with its previously profitable securities trading in Hong Kong now losing money, and a sizeable US trading and infrastructure business with a high tax liability.
Macquarie Bank is experiencing difficulties in its metal and commodity markets, leading to write-downs, and its previously profitable Hong Kong securities trading operation is now losing money.
Macquarie Bank is funding its mortgage lending primarily through retail deposits, although it continues to securitize mortgage loans as the market slowly recovers.
Macquarie Bank's tax rate has risen due to its sizeable US trading and infrastructure business, which incurs tax liabilities in a high-tax regime, unlike its past operations in low-tax Hong Kong.
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