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Macquarie Warns of 25% Profit Tumble, Shares Fall

Macquarie Group, Australia's top investment bank, tipped a 25 percent drop in net profit for the year, double the fall analysts were expecting, as weak markets hit its trading and investment banking businesses. Its shares sank as much as 5 percent after it warned that its full year profit would slide.

The Australian headquarters for Macquarie Bank are seen June 23, 2006 in Sydney, Australia. Macquarie Bank has begun analyzing bookwork of England's largest port operator, Associated British Ports (ABP), prior to making a possible bid next week.
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The Australian headquarters for Macquarie Bank are seen June 23, 2006 in Sydney, Australia. Macquarie Bank has begun analyzing bookwork of England's largest port operator, Associated British Ports (ABP), prior to making a possible bid next week.

Macquarie said its lending, leasing and funds business operating income would rise by a fifth in the year to March but would not be able to offset a more than 30 percent fall for its markets-facing business.

"Global economic uncertainty has deepened since October 2011, with substantially lower levels of client activity in many markets" said Chief Executive Nicholas Moore, who is trying to engineer a turnaround for the bank which a few years ago consistently beat market expectations.

A 2012 profit fall would mark the third profit drop for Macquarie in four years.

With its key trading and investment banking business struggling, Macquarie had previously said it expected earnings in the year to March to be lower than last year's net profit of A$956 million ($1 billion).

Thomson Reuters I/B/E/S estimates showed a consensus net profit forecast of A$840 million or a fall of 12 percent for 2011/12, half the decline Macquarie flagged on Tuesday.

Macquarie's full-year results are due on April 27.

Macquarie has been under pressure to reshape its business after a sharp fall in its share price in 2011, when it moved away from riskier banking products and towards unlisted funds, retail banking, leasing and lending businesses.

Macquarie is not alone in struggling with tough conditions.

Even though global peers such as Goldman Sachs and Morgan Stanley managed to beat market expectations with heavy cost-cutting, revenue was lackluster as tighter regulation hits profitability and market volatility continues amid the European debt crisis.

In Asia, Nomura Holdings , Japan's largest investment bank, posted a unexpected return to quarterly profit, after the sale of restaurant chain Skylark helped to offset the downturn in global equity markets. Nomura posted a 46.1 billion yen ($602 million) loss in the July to September quarter.

Macquarie said it was focussing on cost cuts as well with operating expense for the markets business seen down 10 percent and for the others lower by 5 percent.

In October last year, Macquarie announced a share buyback worth almost $900 million helping to douse concerns about a 24 percent fall in first-half profits.

Macquarie said it had surplus capital of A$3.5 billion and expected to start the buyback in the first of 2012/13.

Macquarie shares, which have shed almost 75 percent since 2007, have risen about 9.7 percent so far this year compared with a 5.9 percent rise for the benchmark index as investors found some value in the battered stock.