By Eric Johnston
MACQUARIE Group has urged the Government to resist the temptation to increase regulation in response to the global financial crisis.
It warned that such action could stifle the innovation that drove the investment banks ambitious push into infrastructure around the world.
The comments came as Macquarie reported that the performance of nearly all its businesses had improved in recent months, adding to the improved confidence spreading through global markets. But it cautioned that its first-half earnings were still likely to fall by about 30 per cent from last years level.
A string of stronger than expected profit results from Wall Street investment banks in recent weeks from Goldman Sachs to JPMorgan has raised expectations of a rapid turnaround from the slump triggered by the collapse of US bank Lehman Brothers last year.
But with governments around the world now under pressure to rein in the banks and their executives responsible for inflating much of the asset bubble, Macquarie acting chairman Kevin McCann urged regulators against overreacting, noting that most of the problems experienced by banks around the world were not present here.
Regulation should not operate to stifle a financial sector from providing innovative products of utility to business, Mr McCann told shareholders at Macquaries annual meeting.
Despite ongoing volatility in global markets, Macquarie chief executive Nicholas Moore sounded an upbeat note, saying market conditions had improved over the June quarter from the first three months of the year.
He said operational performance was better in all its businesses, except for the investment banking division, which had been affected by the timing of several transactions.
While Mr Moore declined to be specific on the outlook, he said first-half profit should be about midway between the $604 million profit the investment bank handed down in the first half last year and the heavily impaired $267 million result during the second half. This translates to headline profit of about $435 million.
Improvement in stock and bond markets was underpinning confidence, which is boosting trading activity by Macquaries clients.
Elsewhere, Macquarie has again started lending out some of its cash pile to big business.
The meeting was held against the backdrop of Macquaries attempt to reinvent itself.
Its specialist listed funds model has come unstuck given the drying up of the cheap debt that fuelled much of its expansion over the past decade.
But with more than $4 billion in excess capital, Macquarie is eyeing acquisitions in Europe and the US, where many banks are offloading businesses in areas ranging from energy trading to funds management.
Macquarie is in the process like all organisations of looking at its business mix and continually evolving, Mr Moore said.