Macquarie soars after beating profit forecasts

Macquarie Group shares surged on Friday after the bank overshot analysts' full year profit expectations and rewarded its chief executive with a A$16.5m (US$13m) windfall.

The Australian investment bank reported a 27 per cent rise in net profit to A$1.6bn for the 12 months ended March 31, ahead of analysts' estimates for A$1.5bn. The performance contrasted with some peers, including Bank of America and Deutsche Bank, which have faced high litigation costs over recent years.

Nicholas Moore, Macquarie chief executive, said the bank's investments in leasing, financing and lending following the financial crash in 2008 were paying off.

"We don't have the crystal ball that tells us the direction to go in what we have are hundreds of crystal balls out there with people in the business responding to market conditions," he said.

Shares in Macquarie rose 5 per cent to A$80.17 in Sydney trading.

Mr Moore, who has been credited with steering the group through a turbulent period, earned a 26 per cent pay rise in 2014, taking home $16.5m - which makes him Australia's second-highest paid chief executive of a listed company.

When asked by the FT if his pay was excessive, Mr Moore said that the bank's remuneration structure was focused on an alignment between the interests of staff, shareholders and clients.

"My own pay, since I've been a CEO, has every year gone to shareholders to be voted on," he added.

Last week David Thodey, the outgoing chief executive of telecoms company Telstra, described his own A$12m pay packet as indefensible when compared with the salaries of average employees, sparking a debate about executive pay in Australia.

Macquarie shot to prominence in the years before the 2008 global financial crisis as its infrastructure funds boomed and a rocketing share price made many of its senior bankers paper millionaires, earning it the nickname the "millionaires factory".

Macquarie - a mix of investment banking, trading, lending and fund management - has shifted its focus away from fee-based income to the more stable cash flows generated from its funds and financing units over recent years.

In Friday's results, the bank said its performance was buoyed by a fall in the company's effective tax rate and a depreciation in the Australian dollar against the greenback.

Profits at Macquarie's asset management division grew by 38 per cent year-on-year to A$1.45bn in the 2015 financial year. The corporate and asset finance division delivered a 35 per cent increase in profit to A$1.1bn while its capital division grew profits 54 per cent to A$430m, boosted by a surge in M&A deals, particularly in Australia.

However, profits at the bank's securities group fell from A$107m last year to A$64m, and loan impairments jumped by 93 per cent to $467m in 2015 - mainly due to project failures related to the end of the mining investment boom.

Analysts at Goldman Sachs highlighted this as its "main concern" in Macquarie's results, but added that the bank's total resource and commodity loan exposure was only 5 per cent of total funded loans.

"Furthermore their energy, resource and commodity equity investments total only A$300m as at March," said Goldman.

In an investor presentation, Macquarie noted regulation costs quadrupled over four years to $413m in 2015, which excluded indirect costs.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation