Nervous times for Macquarie Group, the bank that was once called Macquarie Bank, but which restructured only last year and in the process lost executive chairman, David Clarke and yesterday long time CEO, Allan Moss.
Mr Clarke is non-executive chairman, as the rules for bank holding companies call for. But Mr Moss is going and his departure will be keenly felt because of his reputation for managing risk at Australia's biggest financial risk taking business
Together the losses are major blows and come at a very awkward time for the bank with financial markets in turmoil, more people questioning its business model, a dearth of new deals and investments (although it is helping defend Rio Tinto).
The share price was hammered yesterday: down more than 8% or $6.06 to around $61.10 as investors showed how much they valued Mr Moss.
Coming on top of news of a record profit, a change in the bonus system for employees and a big bad day on world markets, including Australia, it's hard to work out just how much of the $1.53 billion drop in market value for MQG could be linked to Mr Moss's decision to retire.
But it will be a substantial share: under Moss, Macquarie rode the market boom as hard as any other investor and financial group in this country: the shares hit an all time peak in May of last year at $98.64.
He of course has ridden them down (they hit a 52 week low of $58.20 last month), but getting them back towards $90 will take a big effort from Mr Moore and his new management group: the game has changed and Macquarie's hard edged, risky approach to wheeling and dealing is on the nose around the world (as is the Wall Street way as well).
Mr Moss says his decision to retire was partly prompted by some round numbers. He had led the group for 15 years.
"When I sat down to write my report to the board on succession planning, as I do every year, and I did this a couple of months ago, it seemed to me that the numbers were giving me some messages," he told analysts, according to AAP.
"I'll be 60 next year. I have served in this roll for almost 15 years and Nicholas (Moore) will be 50 this year. "And I think these things are important, actually.
"Even though round numbers don't drive decisions, I think they are points, they are indicators of things that one should be reflecting on.
Mr Moore will officially succeed Mr Moss on May 24, after the formal announcement of the 2008 profit.
Mr Moss was paid $33 million in the year to March 2007: Mr Moore was paid around 1.8% less, so he won't be any cheaper.
And the new bonus system will see more shares than cash issued to staff, which is a win for shareholders to opposed the bonuses at the 2007 AGM
Yesterday Macquarie forecast a 2008 annual profit for the year to March 31 of $1.8 billion, up some 23%.on the 2007 result.
"Subject to market conditions over the next eight weeks, we are expecting to achieve a profit of at least $1.8 billion for the year ending March 2008," the bank said in yesterday's operational update.
That was after a 45% rise in first half earnings to $1.08 billion for the September 30 six months. At that time the bank said it expected a slower and lower second half with earnings around $733 million.
Mr Moore goes on to the Group board straight away and his replacement will be another long term banker, Michael Carapiet, currently global Joint Head, Macquarie Capital Advisers. He will succeed Mr Moore as Head of Macquarie Capital.
In the operational update yesterday Mr Moss stressed (as did property and shopping centre operator, Stockland in its profit briefing) how liquid and well placed Macquarie was.
He said there could be losses on some investments, but these were minor.
"Macquarie remains very profitable, well capitalised and well funded. Our holdings of cash and liquid securities are currently more than three times normal liquidity levels. We continue to record strong market shares and are experiencing continued good volumes in most businesses," he said.
"All groups reported a profit for the third quarter ended 31 December 2007. We have no unusual trading exposures and no unusual concerns with credit quality. Funding costs, however, have increased.
"The third quarter to 31 Dec 2007 result was 13% up on pcp and marginally upon 2Q08. All groups reported a profit for the quarter; no unusual trading write-downs; potential provision on investments in real estate funds to be assessed as part of year-end reporting process and overall activity remained reasonable during the quarter despite mixed market conditions
"Macquarie continues to pursue strategic growth initiatives. "However, conditions remain challenging in credit markets and, as foreshadowed at our half year results announcement in November 2007, the effects have flowed through to equity markets.
"This has especially affected listed real estate funds," Mr Moss said.
"Mr Moss noted that the total market value of Macquarie's investments in listed specialist funds and listed fund managers was $A403 million above book value at 31 January 2008. However, the market values of most positions in listed real estate funds are currently below book value.
"Any potential provision on investments in real estate funds would be assessed as part of the year-end reporting process.
"If all current unrealised losses on these funds are recognised (approximately $A230 million) the impact on net profit would be approximately $A70 million. The current full year guidance for the 2008 financial year takes into account any potential provision for investments in listed real estate funds."
