Macquarie Bank says first quarter profit well up - international income 44 per cent of first quarter income

28 July 2005

Macquarie Bank Managing Director and Chief Executive Officer Allan Moss today said the Bank's first quarter profit for the three months ended June 30 2005 was well up on the corresponding period in 2004.

Speaking ahead of the Bank's 2005 Annual General Meeting at the Westin Hotel in Sydney, Mr Moss said the Bank was on track to repeat its full year 2005 result for the year ending March 31 2006, subject to market conditions and excluding both the profit realisation in 2005 from the formation of the Macquarie Goodman Group and the impact of International Financial Reporting Standards (IFRS).

Mr Moss commented that repeating the Bank's profit for the full year ended March 31 2005 would be a good outcome because last year's second half result benefited from very large performance fees. He also went on to say that there was possible upside in the full year 2006 result from specialist fund initiatives and asset realisations.

"During the first quarter, the Bank experienced a continuation of generally good market conditions, with the contribution from all Groups up on the prior corresponding period," Mr Moss said. "Assets under management rose six per cent to $94 billion and performance fees were a major driver during the three month period."

"International income was 44 per cent of total income for the first quarter," he said.

Mr Moss noted that in the last 15 months the Bank had raised $16.6 billion for specialist funds, and a majority of the assets in the specialist funds business were now outside Australia.

Speaking specifically on the Bank's operating Groups for the first quarter, Mr Moss commented:

Investment Banking Group was up very strongly on the prior corresponding period. This was primarily driven by performance fees and specialist fund listings. All offshore locations traded well, with Asia ahead of expectations.

Treasury and Commodities Group was up strongly on the prior corresponding period with strong international income. Some US oil and gas mezzanine financing positions were looking valuable.

Equity Markets Group was up very strongly on the prior corresponding period with contributions from Asia and Europe up strongly.

Banking and Property Group was up on the prior corresponding period on increased volumes from mortgages and margin lending.

Financial Services Group was up on the prior corresponding period, with broad growth in volumes and market share.

Funds Management Group was up on the prior corresponding period.

Market conditions in the first quarter

  • Australian and Asian secondary equity markets and equity derivatives activity remained strong, in most cases ahead of the prior corresponding period. Australian retail broking volumes were up on the prior corresponding period but down on the prior quarter. There were fewer IPOs and underwritings than the same period last year
  • M&A activity was down
  • Foreign exchange and commodity markets remained volatile with good volumes
  • In Australia, non-residential property remained strong in most sectors, although there was continued weakening in the residential sector, particularly in the investment market
  • Lending margins were relatively stable
  • Credit quality remained good
  • Corporate confidence remained satisfactory

Highlights for the first quarter include:

Asia

  • The establishment of a joint venture with Thailand's TMB to undertake stockbroking and investment banking
  • The successful Initial Public Offering (IPO) on the Singapore Stock Exchange of the $S800 million Macquarie International Infrastructure Fund
  • Acquisitions in Korea of the digital cable operator CJ Cablenet, the Incheon Grand Bridge Project and a 50 per cent interest in Korean Independent Energy Corporation

Europe and the Middle East

  • Joint ventures in the United Arab Emirates between the Abu Dhabi Commercial Bank and Macquarie's Treasury and Commodities and Investment Banking Groups

The Americas

  • The New York Stock Exchange-listed Macquarie Infrastructure Company acquired the airport services business, Las Vegas Executive Air Terminal

Australia

  • The $1 billion IPO of the Macquarie Capital Alliance Group (MCAG). In May 2005, MCAG led a consortium to acquire the €1.8 billion European directories business Yellow Brick Road, and in June 2005 an MCAG-led consortium acquired the business of BBC Broadcast for ₤166 million
  • For the six months to June 30 2005 the Bank was ranked no. 1 for Australian equity raised in Thomson Financial's Equity Capital Markets league tables

Highlights from the Address of the Chairman, Mr David Clarke, include:

  • The economic development of China and India present exciting opportunities for Australia and also for Macquarie Bank. "Our expansion in these countries will present some challenges, however we believe that the development of these two emerging markets and the opportunities that they bring will be of great regional significance,” Mr Clarke said
  • Macquarie has been conducting various businesses in China since 1995 and recently opened a corporate finance office in Beijing
  • Macquarie and a syndicate of institutional investors yesterday announced the purchase of a portfolio of nine retail malls in China from a significant local property owner. The properties are located in major shopping precincts and are underpinned by long term leases to a strong mix of tenants. The Bank is currently investigating a number of options for its interest in the properties including the possible partial transfer to a Macquarie managed fund
  • The Bank today announced it is soon to expand its stockbroking and corporate finance presence into India. Macquarie’s entry into the Indian market means that it will offer international clients access to all key Asian markets. Clients in India will have access to equity capital market distribution and expertise in sectors such as infrastructure, utilities, resources, real estate and media

Medium term outlook

Mr Moss said that over the medium term the Bank is expected to benefit from strategic initiatives which have been undertaken, and is well placed due to committed quality staff, diversification, good businesses and effective prudential controls.

"We expect continued growth in revenue and earnings across most businesses over time, subject to market conditions not deteriorating materially. We also expect continued good growth in international businesses," Mr Moss said.

Long term performance

Macquarie Bank Chairman, David Clarke, said since listing on the Australian Stock Exchange in 1996, the Bank had delivered a total shareholder return of 1,300 per cent, a better return than all the stocks in the ASX Top 50 index at that time (assuming reinvestment of all dividends and accounting for all corporate actions).

"In general, investors in Macquarie's specialist infrastructure and property funds have also enjoyed strong returns. Our listed funds, both in Australia and internationally, have delivered total shareholder returns of more than 450 per cent since December 1995. This is well in excess of the returns achieved by both the All Ordinaries Accumulation index and the Morgan Stanley Capital International (MSCI) world accumulation index."

For further information, please contact:

Erica Sibree
Investor Relations
Macquarie Bank Limited
Tel: (612) 8232 5008
Mobile: (614) 1302 6309

Matthew Russell
Public Relations
Macquarie Bank Limited
Tel: (612) 8232 4102
Mobile: (614) 1069 9532

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