Shares in Macquarie Bank were pushed to four-year highs as investors look to a strong second half profit eclipsing the first half net profit of $501 million amid continued benign conditions in global financial markets.
Sentiment was also buoyed by the decision to distribute its $1.4 billion holding of shares in Sydney Airport to shareholders, even though this may reduce prospects of a takeover for the airport operator near term.
In late morning, trading shares in the bank were up a handy 4.4 per cent at $53.20, although shares in Sydney Airport were down 2.9 per cent at $4.07.
Macquarie said its shareholders will receive one share in Sydney Airport for each share held in the bank.
Macquarie booked a 39 per cent rise in first-half net profit, after its market-facing and annuity style businesses both performed well.
Macquarie posted profits of $501 million, beating an average projection of $475 million from two analysts, and up from $361 million in the same period last year.
The bank has been diversifying away from investment banking into less riskier areas such as funds management.
With the earnings a share lifting 42 per cent to $1.50, it has raised the interim dividend to $1 a share from 75 cents paid previously.
The bank remained careful of forecasting the outlook for the balance of the financial year, saying only that subject to market volatility, it expects the second half profit to exceed the profit posted kin the first half.
Difficult conditions in metals and commodity markets resulted additional write-downs in this division, it said.
Along with the underlying improvement in earnings from the key Macquarie funds. corporate and asset finance divisions, earnings received a fillip from lower loan loss and impairment charges.
In the half, investment impairments fell to $82 million from $168 million with loan impairments declining more modestly, to $95 million from $101 million.
The Macquarie funds arm made the largest contribution to the bottom line, lifting its net profit to $500 million from $399 million with corporate and asset finance contributing $396 million up from $359 million.
Bank officials were defensive when discussing Macquarie’s rising volume of mortgage lending, pointing out there has been no decline in lending standards.
Borrowers are far more conservative than in the past, officials told analysts, with no ‘‘low-doc lending’’ while borrowers are quick to switch to fixed rate loans, they confirmed the bank has looked at loan serviceability of borrowers, should interest rates rise.
‘‘We’re funding more out of [retail] deposits,’’ one bank official told analysts. ‘‘We still securitise [mortgage loans] but that market is still coming back slowly.
‘‘But with so much deposits we’re using that’’ to fund out mortgage lending.