UPDATE 5-Australia’s Macquarie warns on profit, shrs sink

* Sees H1 profit down 25 pct vs market fcast of 10.6 pct

* Sees FY 2011 profit in line with FY 2010

* Weak markets hurting key trading and advisory business

* Need to cut bloated employee base or pay – fund managers

* Shares tumble as much as 8 pct to 15-month low
(Adds fresh link to Starmine comparative data)

By Narayanan Somasundaram

SYDNEY, Sept 6 (BestGrowthStock) – Australia’s top investment bank
Macquarie Group Ltd (MQG.AX: ) warned investors it would miss
profit forecasts after weak markets took a toll on its trading
and advisory business, sending its shares to a 15-month low.

Macquarie, dubbed the “millionaires’ factory” for its
senior bankers’ hefty pay packages, said its first half net
profit would fall by a quarter and its fiscal year 2011 profit
would be in line with last year’s.

The forecasts follow two earlier warnings on market
conditions and come as analysts and investors call on the bank
to cut jobs or pay to protect earnings.

Macquarie is not alone in suffering. Global rivals such as
Goldman Sachs (GS.N: ), Morgan Stanley (MS.N: ) (Read more about the money market today. ), investment bank
units of JPMorgan (JPM.N: ) and Credit Suisse (CSGN.VX: ) have all
shared grim outlooks.

“The level of deal activity suggests there will be an
earnings shortfall in the near-term,” said Christopher Hall,
chief investment officer at Argo Investments , which owns
Macquarie shares.

“But on a two to three year time frame, their focus on
unlisted funds, deployment of surplus capital and a general
lift in market sentiment should pay off.”

For StarMine comparative data on Macquarie and investment
banking peers: http://link.reuters.com/tuc69n

Globally advisory fees have fallen as deal flows slowed
trading volumes have thinned amid increased market volatility
and fears of a double-dip recession.

Equity capital market volumes have slid 10 percent and debt
raising have slipped nearly a fifth so far this year, failing
to offset a 23 percent rise in mergers and acquisitions
volumes, according to Thomson Reuters data.

Macquarie’s trading and advisory businesses make up nearly
three-quarters of its revenue.

At 0422 GMT, Macquarie shares had trimmed losses, down 5.2
percent at A$35.07 in a positive broader market (.AXJO: ). The
shares had fallen as much as 8.1 percent to its lowest since
June 2009.

The stock, down 28 percent so far this year, has recorded
just three annual falls in the past 14 years.

“Conditions in most markets have continued to be weak,”
Deputy Managing Director Richard Sheppard said in a statement.

“Full-year result continues to be impacted by the cost of
our continued conservative approach to funding and capital.”

Macquarie’s prediction for a 25 percent first half profit
fall compares with consensus expectations for an 11 percent
rise. Its guidance that 2011 full-year profit would be in line
with the previous year is also worse than forecasts for a 14
percent rise.

Macquarie until recently consistently beat expectations
with its model of buying and pooling assets, listing them on an
exchange and charging fees for managing.

But a migration to a more conventional investment banking
model in the wake of the global financial crisis has married
its fortunes to the market.

Macquarie, which gets almost half its revenue from
Australia, has seen its dominance at home slip.

While it has maintained its No. 2 position in the Australia
M&A league table, its market share has fallen more than a
third, with UBS (UBSN.VX: ) gaining at the expense of Macquarie
and last year’s leader Goldman Sachs. It is not among advisors
in BHP Billiton’s (BHP.AX: ) $39 billion bid for Potash Corp
(POT.TO: ).

It has fallen to fifth position in its mainstay equity
underwriting business ceding ground to Bank of America Merrill
Lynch (BAC.N: ), JPMorgan and Royal bank of Scotland (RBS.L: ),
according to Thomson Reuters data.

Macquarie, which has A$3.1 billion in surplus capital and
A$29 billion in liquid assets, had twice earlier warned
concerns about the global recovery had dragged down market
activity to their lowest level since 2004, pushing analysts to
cut forecasts.

But this is the first time it has given a specific forecast
and analysts are expected to slash their forecasts once again.
(Editing by Jean Yoon)

UPDATE 5-Australia’s Macquarie warns on profit, shrs sink