Macquarie Group, Australia's biggest investment bank, reported a 26 percent rise in second-quarter profit, helped by strong growth in Asia and takeover activity, but its shares fell 5 percent on a cautious outlook.
Macquarie forecast a second-half result at least in line with last year, but warned that equity market conditions may not be as favorable and that some businesses could be affected by seasonal conditions.
"Market conditions are generally very volatile and frankly somewhat nervous," Chief Executive Allan Moss told an analysts briefing.
Macquarie's first-half profit rose 45 percent on a year ago, outpacing its own forecast, but second-quarter profit fell 17 percent on the first quarter as a global credit crisis hit deal flows. The interim dividend of A$1.45 a share fell short of analysts' forecasts for A$1.58.
"It just seems that Macquarie is not immune to what is happening in the credit market," said Paul Biddle, a fund manager with Souls Funds Management Ltd, which does not hold Macquarie shares.
"Is this thing bullet proof? No it's not," he said, adding Macquarie's outlook comments suggested the company's full-year profit could land at the lower end of market expectations.
Macquarie reiterated that it had no material problem credit exposures, no exposures to structured investment vehicles and US$300 million holdings of triple A and double A rated CDOs.
Macquarie, which completed a restructure earlier this month to accelerate global expansion, said net profit in the six months to September climbed to A$1.06 billion (US$938 million), from A$730 million reported a year ago.
The robust profit is in sharp contrast to the troubles that have besieged Wall Street investment banks, many of which have written off billions of dollars due to their exposure to distressed subprime mortgage loans.
Macquarie said conditions in Asia were especially strong, helping its regional broking business. International income rose 70 percent to A$2.5 billion from a year ago.
By late morning, Macquarie shares were down 3.6 percent to A$79.10 while the benchmark index was up 0.4 percent.
Macquarie forecast in September a 40 percent rise in first-half profit, though it also said it was facing a slowdown in deals due to turmoil in global credit markets.
Six analysts on average had projected Macquarie's profit to rise 40 percent to A$1.02 billion.
Moss said the first-half result had benefited from a high number of asset sales that were unlikely to be repeated in the second half. He said it was "too early to make a definitive forecast for the full year".
Apart from its traditional investment bank operations, Macquarie also manages about A$224 billion worth of infrastructure assets, such as toll roads and airports, which it bundles into listed and unlisted funds.
It earns fees in return for managing these assets, which jumped about 50 percent in the second half to A$477 million.
The bank is benefiting from increased equity market volatility, which increases trading volumes, while competition on deals from private equity funds has been reduced as they grapple with higher funding costs.
Since the start of the credit turmoil nervous investors have sold shares in Macquarie and smaller domestic rival Babcock & Brown on any whiff of any trouble at bigger Wall Street rivals such as Goldman Sachs.
Macquarie's stock plunged 10 percent in early August after it warned that retail investors in two of its debt funds could potentially suffer big losses due to the crunch in global credit markets.
It is down 1.4 percent for the year, underperforming a 13.9 percent rise in the benchmark S&P/ASX 200 Index.