Australia's Macquarie first-half net profit up 39 percent; tops forecast

Macquarie Group headquarters in Sydney, Australia
Ian Waldie | Bloomberg | Getty Images

Australia's top investment bank Macquarie Group booked a 39 percent increase in first-half net profit on Friday, underpinned by a strong performance from its funds business and a swing to profitability in its securities arm.

Macquarie reiterated that full-year net profit would strengthen in 2014, without quantifying the rise, providing that market conditions were no worse than they had been in the year before.

The bank posted first-half net profit of A$501 million ($474.42 million), beating an average projection of A$475 million, its strongest result in four halves.

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Macquarie's shares have jumped 44 percent so far this year, outperforming a 17 percent gain for the broader market on hopes that a rebound in mergers and acquisitions as well as initial public offerings will drive earnings higher.

Chief Financial Officer Patrick Upfold said the bank continued to maintain well-diversified funding sources and pursue a strategy of diversifying its funding, including growth in its deposit base.

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The investment bank's funds division posted a surge in net profit, up 40 percent from the first half last year to A$500 million, bolstered by a rise in fees.

Macquarie has been diversifying away from investment banking into less riskier areas and pushing rapidly into home mortgages.

That threatens 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, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking.

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Macquarie said its Australian mortgage portfolio had increased 26 percent since March 31, 2013, to A$14.6 billion, or 1 percent of the nation's mortgage market.

Analysts are forecasting the bank to report an annual net profit of A$1.1 billion for the 2014 financial year, about 30 percent higher than the year before.

Macquarie Securities, which contains the bank's equities arm, posted a net profit contribution of A$71 million, up from a loss of A$64 million in the first half the year before. That comes amid a resurgence in the Australian initial public offerings market, and it was partly underpinned by an increase in equity capital markets activity, Macquarie said.