Europe a key contributor to 60 per cent increase in record Macquarie Bank profit

15 May 2007

Key points

• NET PROFIT OF $A1.46BN¹ (£600M, €885M) – 15TH CONSECUTIVE YEAR OF RECORD PROFIT
• SIGNIFICANT GROWTH OUTSIDE AUSTRALIA: INTERNATIONAL INCOME UP 70% TO $A3.46BN (£1.4BN, €2.1BN) OR 55% OF THE BANK’S OPERATING INCOME
• EUROPE, AFRICA AND THE MIDDLE EAST INCOME UP 100% ON PCP
• MACQUARIE TO APPLY TO ESTABLISH UK BANKING ENTITY

Macquarie Bank today announced a $A1.46bn (£600m, €885m) after-tax profit attributable to ordinary equity holders for the full year to 31 March 2007, representing a 60% increase on the prior year and nearly six times the level of five years ago.

Revenue from outside Macquarie’s Australian home base has increased 70% to A$3.46bn (£1.4bn, €2.1bn), and the Bank’s operations now take in over 50 international offices in 24 countries.

“Macquarie has transitioned from being an Australian institution growing internationally, to a global company with Australian headquarters,” said Macquarie Bank Managing Director and Chief Executive Officer, Mr Allan Moss. “We have reached a watershed with international income at more than 50% of income across most of Macquarie’s businesses.  In addition, international specialist fund equity raisings were more than triple the Australian raisings and international institutions now hold more than 35% of the Group’s issued capital.”

Structural changes to facilitate growth

Mr Moss outlined a number of proposed structural changes that will help facilitate Macquarie Bank’s continued international growth:

• The development of the proposed non-operating holding company restructure (NOHC), targeting shareholder approval in the December quarter of 2007 following Australian regulatory approval, which remains subject to finalising a number of operational matters
• The intention to submit an application to the UK Financial Services Authority (FSA) to establish a UK-incorporated banking entity, to better support the rapid growth in the Bank’s UK and European businesses.

Strong growth in Europe

Income from Europe Africa and the Middle East is up 100% to $A1.4bn (£576m, €848m), while European funds under management have reached $A64.4bn (£26.5bn, €39.0bn) – 33% of Macquarie’s total funds under management of $A197.2bn (£81.1bn, €119.5bn). The business growth is supported by staff increases across the European operations – Macquarie now has almost 900 staff in Europe.

Head of Macquarie Europe, Jim Craig, says the UK Banking entity will provide additional flexibility for Macquarie to drive further European growth: “A UK-incorporated banking entity will provide a European ‘passport’ for the banking businesses to facilitate their further development in Europe.”

“We have achieved strong growth in Europe over the past couple of years, supported by increased staff numbers and by expanding the breadth of business conducted by Macquarie in the UK and Europe,” said Mr Craig.  “We expect this growth to continue.”

Macquarie’s European business has been characterised by its infrastructure investment and management activities -  49% of assets in Macquarie’s specialist funds and syndicates are located in Europe, Africa and the Middle East. However, the broader investment banking, financial services activities of Macquarie are also making a big impact on the European result, including advisory, real estate, treasury and commodities, structured finance, and leasing.

Highlights in Macquarie Bank’s European activities for 2006/7 include:

• Raising of Macquarie European Infrastructure Fund II, which recently closed with €4.6 billion in investor commitments
• Acting as co-advisor to Grupo Ferrovial regarding the on-market takeover of BAA
• Acquisition of the UK gas supply company, Corona Energy, taking Macquarie’s Treasury and Commodities business into physical gas trading
• Advisor to Lundin Mining on the merger with EuroZinc Mining Corporation
• The Macquarie fund-led consortium acquired Thames Water for £8 billion
• Joint venture with Tattersalls in the recommended on-market acquisition of UK gaming centre operator, Talarius
• Establishment of a management agreement between Macquarie Real Estate Europe and self-storage operator Storage King
• Structured treasury and commodities product launches including Dry Bulk Freight, in partnership with LDB & Partners
• Macquarie Global Property Advisors opened offices in France and Germany and made significant investments in Poland
• Asset acquisitions including road side services operator Moto and the East London Bus Group
• Strong and growing contribution from real estate structured finance business.

Since the 31 March balance date, European deal flow has continued with:

• The acquisition of the off-street parking business of National Car Parks by Macquarie European Infrastructure Fund II
• Provision of project finance facilities for the UK-based Max Petroleum for the development of oil and gas assets in Kazakhstan 
• Macquarie CountryWide Trust announced its first European acquisitions, acquiring five shopping centres in Poland and two in Germany
• Advising on the acquisition of National Grid Wireless by Arqiva
• The acquisition of Airwave by Macquarie European Infrastructure Fund II and Macquarie Communications Infrastucture Group.

Outlook

Mr Moss said: “The Bank has had a strong start to the financial year commencing 1 April 2007. All Groups in all regions are busy and there have already been significant transactions.

“Subject to prevailing market conditions continuing, we expect strong IPO and mergers and acquisitions activity and good growth in the specialist funds. We expect the trading businesses to benefit from geographic and product expansion and from continued good equity broking volumes.

“The Bank expects to maintain or strengthen market positions in Australia and internationally. We are planning for continued strong growth with international income expected to continue to make an increasingly important contribution. This will be underpinned by continued staff growth with an emphasis on growth outside Australia. Swing factors will include asset realisations and general market conditions.”

¹Conversion rates are as at 31 March 2007; AUD to Euro 0.605927 and AUD to GBP 0.411269

For further information, please contact:

Karen Smith
Corporate Communications Manager
Macquarie Bank
Tel: (44) (0) 20 7065 2420