Macquarie Group plans to cut 10 per cent of its investment banking jobs and fears its full year profit will plunge as difficult trading conditions take their toll.
Australia’s largest investment bank on Tuesday warned its net profit for 2012 would fall by a quarter, far worse than investors had been expecting.
Chief executive Nicholas Moore said the global economic uncertainty had deepened and resulted in “substantially lower levels of client activity in many markets”.
The planned staff layoffs follow similar announcements from Australian retail banks such as Westpac and ANZ, while the bleaker outlook mirrors sentiments expressed by other investment banks worldwide.
In a presentation to investors in Sydney on Tuesday, Mr Moore said net profit for fiscal 2012 was expected to be down 25 per cent from the $956 million achieved in the prior year, based on current market conditions.
Should the result print in line with expectations, net profit would come in at about $717 million, well below the $840 million the market had been expecting before Tuesday’s announcement.
The company said its securities business would make a negative contribution to net profit in fiscal 2012, which ends on March 31.
Macquarie Capital’s net profit contribution would also be significantly lower.
Mr Moore said both units were experiencing difficult trading conditions in many markets and had been severely affected by the economic climate.
“These market-facing businesses are really feeling the brunt of what’s happening out there in the macro world,” Mr Moore said.
Macquarie Securities group head Stevan Vrcelj said the company was reviewing its current portfolio, exiting some businesses and reducing costs, which had involved job losses.
“It will be more than 10 per cent head count reduction in terms of the front end of the business,” Mr Vrcelj said of the job cuts.
“And that also then feeds through into further head count reductions in terms of the support structure for Securities.”
In a presentation to analysts, the bank said it had 14,628 staff across the group at December 31, 2011. This was down 460 from 15,088 at September 30, 2011.
Macquarie said it expected to have $3.7 billion in surplus capital above regulatory requirements by the end of fiscal 2012 and planned to buy back up to 10 per cent of its own shares.
The buyback, due to start in the first half of fiscal 2013, was subject to regulatory approval.
On a positive front, Macquarie said its fixed income, currencies and commodities unit experienced improved conditions during the December quarter.
Macquarie’s shares fell about four per cent in early trade as investors digested the surprise profit warning.
However they recovered to close down 0.77 per cent, or 20 cents, at $25.90.
“We expected a weak result given market conditions but this is lower than our forecast,” Morningstar analysts said in a research note.
