KEY POINTS:
Fallout from the credit crisis has hit closer to home with Macquarie Group, Australia's largest securities firm, revealing a 43 per cent drop in half-year profit.
The ASX-listed company, which has an investment advisory and broking business in New Zealand with more than 110 employees, is heading for
its first fall in annual profits in 17 years.
Macquarie is also a majority stakeholder in NZX-listed rest home operator Metlifecare via its Australian investment arm and owns several other New Zealand rest home operations.
In the six months to September 30, the company's net profit after tax fell to A$604 million ($709 million), down from A$1.06 billion a year earlier, but in line with market forecasts.
Macquarie's Asia Pacific business, of which New Zealand is a part, was one of the hardest hit.
During the six months to September income from the region plummeted 51 per cent to A$483 million although assets under management rose 10 per cent.
Macquarie Group managing director and chief executive Nicholas Moore said the past six months had seen unprecedented turmoil and that had intensified since mid-September.
"Financial markets have been highly disrupted during the period, with a crisis of confidence in credit markets and systematic falls in global liquidity leading to the stress and failure of major financial institutions."
But Moore said Macquarie's result was sound in light of the turmoil and he underscored its strong funding and capital position.
The company said it had cash and liquid assets of A$26.3 billion and was more than 40 per cent above its minimum regulatory requirements.
That reassurance was welcomed by the market with Macquarie shares soaring 26 per cent on Australia's ASX-200 to A$26.03, after touching a six-year low on Monday.
It closed at A$24, up A$3.40.
"It's a relief. There'd been some concern about an equity raising in the profit announcement. That didn't eventuate and the numbers were not too far away from forecasts," said Leigh Gardner, head of distribution at ABN Amro.
National Australia Bank announced a capital raising earlier this month of up to A$3 billion in a share placement to strengthen its balance sheet, prompting analysts to predict others would follow suit.
"Importantly, the group took its medicine with A$1.1 billion of writedowns against managed funds and unlisted assets," Citigroup said in a note to clients.
The last time Macquarie reported a fall in annual net profit was in 1991/92, during the last recession in Australia.
Macquarie has not been directly exposed to the US sub-prime mortgage meltdown but its shares have still fallen 73 per cent this year to Monday's close.
Shares in smaller rival Babcock & Brown have plunged 98.5 per cent this year.
NZ INTERESTS
Macquarie's New Zealand business:
* Investment banking arm.
* Institutional and retail stockbroking operations.
* Majority stakeholder in publicly listed rest home operator Metlifecare via its Australian investment arm. Also owns several other New Zealand rest home operations including the former Red Cross-run homes.
* Brook Asset Management.
- AGENCIES