By Eric Johnston
MACQUARIE Group is poised to issue a subdued outlook when it updates shareholders on Wednesday, despite a looming windfall from the planned sale of the management rights to the investment bank's flagship airport fund.
Despite the loss of annual fees from the management of Macquarie Airports, analysts said the broader exit by Macquarie from the specialist funds business ultimately would be a positive for the investment bank, given its shares had been weighed down by exposure to the underperforming satellite funds.
The management internalisation of Macquarie Airports "vividly illustrates the ongoing evolution of Macquarie Group", said Credit Suisse analyst James Ellis.
Tollroads operator Macquarie Infrastructure Group is widely expected to be the second key fund to cut itself free from the Macquarie empire with details of a restructure to be released within weeks.
The investment bank already appears to be preparing to extract itself from MIG, reshuffling ownership of a 1.5 per cent stake in the tollroads that was held by the management entity.
Corporate filings show Macquarie Infrastructure Investment Management recently sold its entire holdings in MIG back to the investment bank for $104 million.
Still, internalisation of MIG would be a more complex affair, given the large level of debt held at some tollroads.
Analysts also believe the net present value of MIG's management would nearly be twice the $345 million in scrip Macquarie Airports has paid to internalise its costs.
Macquarie is already eyeing building up a global stockbroking business centred on Asia, London and New York, as well as significantly expanding energy trading.
Macquarie has a long history of being able to "reinvent itself", Mr Ellis said.
He expects Macquarie to book a pretax windfall of $251 million on the Macquarie Airports transaction, if approved, which will see the investment bank's profit grow as much as 35 per cent to $1.1 billion this year.
Management fees paid by Macquarie Airports amount to about $100 million over the past two years, with the bulk of these being paid in fiscal 2008.
Macquarie Infrastructure has paid more than $116 million in management fees over the same period. Meanwhile, Macquarie is expected to come under significant pressure to make further changes to the way it pays staff after it was forced to withdraw initial plans to overhaul of remuneration until the Government finalised its tax treatment of employee share schemes.
Macquarie has introduced "interim" remuneration arrangements including increasing the proportion of share-based payments and putting a temporary hold on the issue of new options.
While signs of life seem to have reappeared in markets around the world, analysts believe activity for Macquarie during the June quarter has been relatively quiet, particularly in equities and asset management operations.
In May, the investment bank, which is famously conservative when issuing profit guidance, said it was "well placed" to grow over the medium term.