(Updates with closing share prices in fifth paragraph.)
July 29 (Bloomberg) -- Macquarie Group Ltd. Chief Executive Officer Nicholas Moore may struggle to meet the full-year profit forecast he reiterated yesterday, said analysts.
Net income at Australia’s largest investment bank for the year ending March 31, 2012, will be A$1.01 billion ($909 million), according to the median estimate of six analysts surveyed by Bloomberg News today. That’s 12 percent less than their previous profit forecast of A$1.14 billion.
Moore yesterday stuck to his forecast that profit will top the A$956 million reported for the previous fiscal year. Markets will need to rebound in coming months for that to happen, the analysts said. Moore has shrugged off calls to join rivals such as Goldman Sachs Group Inc. and Credit Suisse Group AG by cutting jobs to boost earnings at what is Asia’s second-worst performing financial stock in the past six months.
“People are increasingly getting more skeptical” about Macquarie, said Prasad Patkar, who helps manage the equivalent of $1.7 billion at Sydney-based Platypus Asset Management Ltd. “They look like an expensive investment bank in a relatively weak position compared to the large global players.”
Shares of Macquarie fell 1.5 percent to A$27.57, the lowest in more than two years, at the close in Sydney. The stock has slumped 26 percent this year, almost four times the decline in the benchmark S&P/ASX 200 Index.
Earnings in the 12 months to March 31 at the bank’s fixed income, currency and commodities unit, which accounted for 70 percent of trading income last year, will be “broadly in line” with the previous fiscal year, Macquarie said yesterday, cutting its April prediction that profit will rise.
The so-called FICC unit was the biggest contributor to total profit in the six months ended March 31 among the eight divisions the bank details in its earnings reports, adding A$408 million to earnings in the period, when the bank posted net income of A$553 million.
FICC is among Macquarie’s “market facing” businesses that suffered in the June quarter from slumping sentiment among clients, Moore told reporters yesterday. “All the counterparties we deal with basically were experiencing a lack of confidence,” he said.
There are few signs global confidence is about to rebound. The Standard & Poor’s 500 index fell for a fourth day yesterday as U.S. lawmakers indicated they were no closer to reaching an agreement to increase the debt ceiling and avoid default.
“Without a material improvement in markets in the second half, which at present seems unlikely, one would suggest that the risk to earnings remains on the downside” for Macquarie, Deutsche Bank AG analysts led by James Freeman in Sydney wrote in a note dated yesterday. “Until the risk to earnings is reduced, we struggle to see Macquarie outperform.”
Sentiment has been further battered by weak earnings at rival investment banks such as UBS AG, which this week scrapped its profit target for 2014 and announced cost cuts after second- quarter profit dropped 49 percent. Credit Suisse and Goldman Sachs have between them announced plans to cut 3,000 jobs.
Macquarie’s earnings over the next three years will be between 15 percent and 19 percent lower than previously forecast, according to Sydney-based analysts at Royal Bank of Scotland Group Plc including Andrew Lyons.
“We struggle to see markets recovering to the extent required for Macquarie to reach its full-year 2012 guidance,” Lyons wrote in the note dated yesterday.
--Editors: Malcolm Scott, Linus Chua
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