Macquarie Profits Slide Due to Global Volatility

The country's only homegrown investment bank Macquarie Group (ASX:MQG) warned of a drop in its first-half profit as market volatility around the world hit its businesses.

The bank announced in a market update that its bottom line will be well below the forecast earnings, saying the month of August was more challenging than expected. It also said rising tax rates and the sluggish global economy slashed earnings in the six months to September.

Macquarie chief executive Nicholas Moore said in July that first-half profit for 2011-12 would at least level with its $403 million bottom line the previous year. The bank did not revise it forecast yesterday.

The downgrade could mean more jobs cuts, which is understood to have already started. Back office positions are most threatened in the bank's global workforce of 15,500, but investment banking and trading areas are also at risk.

Majority of analysts pegged Macquarie's first-half bottom line at $363 to $390 million and the bank expected its full-year 2012 profit to shoot over last year's $956 million, depending on market conditions.

"Macquarie continues to expect an improved result for the full-year 2012 on 2011 if market conditions for the remainder of the year are not worse than the prior corresponding period," said the bank.

Macquarie said MAp (formerly Macquarie Airports) would also be an advantage, giving back $1.5bn back to security holders.

Macquarie shares rose 1.6 percent to $23.53 despite the downgrade, which brokers attributed mainly to electronic trading.