* H1 net profit A$501 mln vs forecast of A$475 mln
* Shares surge on earnings, Sydney Airport proposal, dividend
* Earnings rise powered by asset management, IPOs
* Shares up some 50 percent for year to date
SYDNEY, Nov 1 (Reuters) - Australia's top investment bank Macquarie Group Ltd booked a better-than-expected 39 percent increase in first-half net profit, bolstered by a strong performance from its asset management division.
The results underscore how Macquarie's diversification away from investment banking into less riskier areas such as annuity-style businesses have helped it weather volatility in capital markets better than other investment banks.
By contrast, third-quarter profit for Barclays slid 26 percent with the bank blaming a slowdown in capital markets while Goldman Sachs Group Inc recently slashed employee compensation costs by 35 percent after revenue weakened.
Setting itself up for a robust annual result, Macquarie posted first-half net profit of A$501 million ($474 million), also helped by a pick-up in equity financing. It was its strongest first half since the first six months of 2009, beating an average projection of A$475 million.
Second-half profits are often much stronger than the first half of the year and Macquarie reiterated that annual net profit would strengthen in 2014, providing that market conditions were no worse than they had been in the year before.
Macquarie's shares surged after the results, with investors also keen on the investment bank's proposal to distribute most of its 17 percent stake in Sydney Airport Holdings Ltd to shareholders - a decision it took as the holding no longer fits the bank's focus.
"The strong operating performance and the Sydney Airport distribution confirms our positive view and suggests Macquarie is on the way back to doing what it does best - taking full advantage of the recovery in equity and investment markets," said Morningstar analyst David Ellis.
Macquarie also unveiled an interim dividend of A$1.00 a share, up from the A$0.75 it paid in the first half of last year.
The shares ended the day 4.2 percent higher at A$53.10, compared to a 0.3 percent decline for the broader market. The shares have rocketed some 50 percent for the year to date on hopes that a rebound in mergers and acquisitions as well as initial public offerings would drive earnings higher.
FUNDS AND IPOS
Its funds division, which manages assets for institutional and retail investors, was a key contributor posting a 40 percent rise in profit to A$500 million, bolstered by a rise in base fees.
Assets under management rose 11 percent to A$380.7 billion bolstered in part by fund raising and investments in its infrastructure business.
An upswing in IPOs also helped earnings. The bank has been involved in some high profile domestic deals, acting as a joint-manager for OzForex Group which raised A$440 million in its October initial public offering, a business in which it had also been a pre-IPO investor.
Macquarie has ranked number one in Australia so far this year for mergers and acquisitions involvement and number two in equity capital markets, according to Thomson Reuters data.
Macquarie Securities, which contains the bank's equities arm, made a first-half net profit contribution of A$71 million, up from a loss of A$64 million in the same period a year earlier.
The bank has also rapidly been increasing its exposure to the Australian mortgage market, threatening to disrupt a highly profitable segment of the banking industry long dominated by the country's top four lenders: Australia and New Zealand Banking Group Ltd, Commonwealth Bank of Australia, National Australia Bank Ltd and Westpac Banking Corp .
The bank said its Australian mortgage portfolio had increased 26 percent since March to A$14.6 billion, or 1 percent of the nation's mortgage market.