Macquarie Group says it is on track to post its first full-year increase in profits since 2010, despite sluggish conditions on global markets taking a hefty toll on its flagship investment banking and stockbroking businesses.
The investment bank this morning handed down an 18 per cent rise in half-year profit of $361 million, and maintained its guidance that this year's result would exceed last year's earnings of $730 million.
Although the profit performance was weaker than analyst expectations, Macquarie shares have rallied strongly today, rising more than 4 per cent to $31.06 in a falling market.
Macquarie has been hit hard by the turmoil on global share markets, reflected in poor results in its divisions that handle mergers and acquisitions and equity markets.
Despite this weakness, however, the bank upgraded its guidance for its funds management arm, where it is investing more capital in a bid to make the group less vulnerable to market volatility.
The chief executive, Nicholas Moore, maintained his guidance for higher profits this financial year, provided market conditions were no worse than 2011-12.
"The group remains well-positioned, with a strong and diverse global platform and specialist skills across a range of products and asset classes," Mr Moore said.
In a bid to rein in costs, the bank said it had cut more than 700 staff since March, with total employee numbers falling to 13,463.
Macquarie Securities, the home of its stockbroking arms, made a $64 million loss during the half and bore the greatest brunt of the cost cutting, with $96 million cut out of the business.
Mr Moore said the weak turnover on global markets had taken a toll on this part of the business, with average daily equity trading volumes in Australia down 23.5 per cent on the same half last year.
"Volumes are just down here in Australia and across the world," Mr Moore told analysts.
The division that handles mergers and acquisitions made a profit of $10 million, as a paucity of deals continued to limit income from fees and advice.
While Macquarie said its equity market business was unlikely to return to profitability under current market conditions, the less volatile funds management arm upgraded its forecasts slightly for the six months ahead. Every other division left its forecasts unchanged.
Macquarie's profit guidance for this year of more than $730 million remains well below the bumper profits of up to $1.8 billion it made before the full effects of the global financial crisis were felt.