***mbl kicked in the guts****, page-16

analysts downgrade macbank Analysts downgrade MacBank
From: AAP
February 02, 2006

MACQUARIE Bank suffered downgrades from brokers today who raised questions about its earnings forecasts and the investment bank's plans to roll out new specialist funds.

Shares in Macquarie Bank (mbl.ASX:Quote,News) dived yesterday after it made only a minor upgrade to its guidance and revealed that a number of major floats will miss out on inclusion in this financial year, ending March 31.

Macquarie now expects an annual net profit "slightly up" on the record $823 million in 2004-05.

Goldman Sachs JBWere analyst James Freeman pulled back his forecast for annual net profit by 10 per cent to $875 million, with further downgrades to the following two financial years.

Mr Freeman questioned whether Macquarie (mbl.ASX:Quote,News) would be able to achieve its plans to spin off about $1.8 billion worth of assets currently on its balance sheet into new specialist funds over the coming months.

These include a long-awaited Korean infrastructure fund and the float of explosives company Dyno Nobel in Australia, both of which were previously anticipated to have occured by the end of March but will now likely take longer.

He pointed to challenges such as rising bond yields and the underperformance of Macquarie's funds such as Macquarie Airports and Macquarie Infrastructure Group, which has wiped off all their performance fees in the second half.

"We believe these issues could see Macquarie struggle to get its target of $1.8 billion of assets off balance sheet over the six to seven months; or alternatively it could see Macquarie sacrifice the price at which these assets are sold," Mr Freeman said.

He also said there was a risk Macquarie could continue to miss out on performance fees, which would reduce net profit by about $50 million or five per cent in 2006-07.

UBS analysts also downgraded their earnings forecasts for Macquarie, partly due to weaker trading conditions and partly due to the delays in the new specialist funds.

"This may have the effect of pushing other transactions further out the pipeline, potentially leading to a slowdown in the specialist funds model rollout," the analysts wrote.

But they said underlying investor demand remained reasonably strong.

"We see the recent (share) price weakness as a good buying opportunity," they said.