Macquarie Bank Limited

Since our May 7, 1999 brief (Accumulate below $18.00) Macquarie announced on May 28, 1999 a net profit after tax for the year ended March 31, 1999 of $165m, up 16.9%, on revenues 25% higher at $831.2m. The final dividend was 8c higher at 38c, fully franked. We like Macquarie because it doesn't really suffer lending-margin problems like the other banks, but gets a larger slice of its revenues from fee-based activity. Fee and commission revenue rose by around one-third while trading income actually fell. Indicative of sound management is the noticeable lack of problem areas across the bank's six divisions. The profit growth is solid in that the bank's asset base only rose 10% to $33bn. Macquarie is well placed to make an acquisition of some sort, with total capital adequacy now standing at a massive 17.3%. With Macquarie continuing to trade at a below-market PER, along with the other banks, we are comfortable with our ACCUMULATE recommendation, preferably below $18.00.