headkicker bank gets some of its own medicine

Interesting article in todays Age newspaper. Looks like the worst may still be yet to come for Macquarie Bank?

Head-kicker bank gets some of its own medicine

James Kirby
March 16, 2008
Page 1 of 2


It used to be: "Who's afraid of Macquarie Bank?" That's changed a little now. It's more like: "Who's afraid of Macquarie Bank getting into trouble?"

Less than a year after the outgoing chief executive of the millionaires factory, Allan Moss, told us that the US credit crisis would have little impact on Australia, the unthinkable is upon us - Macquarie Bank may soon be sacking people.

When Moss made his unfortunate comments (a rare slip it must be said) Macquarie Bank was roaring towards $100 a share. Now it is less than $50 - that's a 50% drop from top to bottom. In contrast most blue chips are down about 25% so far this year.

As the bank struggles with a shredded share price, it is cutting back on selective business divisions - such as residential mortgages - and talking of redeploying staff. Management will not rule out lay-offs if things get worse.

Any problems at Macquarie Bank will go though the market like wildfire - as Australia's only world-class investment bank it has innumerable connections with almost every leading business. Not to mention of millions of customers and investors.

What's wrong? First of all the bank has had some very public failures. A Macquarie hedge fund called Fortress is making severe cutbacks to secure its financial position. Worse still, a series of funds called the ALPS funds - pitched as high-yielding funds for small investors - is getting into all sorts of trouble as the US market throws up one disaster after another.

More worrying, investors are shunning "financial engineering" stocks such as Macquarie - MFS, a group that liked to style itself as a "junior Macquarie" has collapsed spectacularly with its former executives now being chased down by Citigroup to pay back loans.

But that's just what we see on the surface. It's the more subtle signals at Macquarie that are really turning heads in the market.

Sure, Macquarie has been sold down. But all banks have been sold down since the start of the year. The difference with Macquarie Bank is that it has been dumped.

At the end of last week Macquarie was not just underperforming the ASX, it was underperforming a string of global investment banks that have released the sort of bad news that would put Macquarie's seemingly marginal troubles at Fortress and ALPs to shame.

For example, Macquarie has fared worse than Bear Sterns, the Wall Street bank which is receiving emergency funding this weekend.

Head-kicker bank gets some of its own medicine
Email Print Normal font Large font AdvertisementJames Kirby
March 16, 2008
Page 1 of 2


It used to be: "Who's afraid of Macquarie Bank?" That's changed a little now. It's more like: "Who's afraid of Macquarie Bank getting into trouble?"

Less than a year after the outgoing chief executive of the millionaires factory, Allan Moss, told us that the US credit crisis would have little impact on Australia, the unthinkable is upon us - Macquarie Bank may soon be sacking people.

When Moss made his unfortunate comments (a rare slip it must be said) Macquarie Bank was roaring towards $100 a share. Now it is less than $50 - that's a 50% drop from top to bottom. In contrast most blue chips are down about 25% so far this year.

As the bank struggles with a shredded share price, it is cutting back on selective business divisions - such as residential mortgages - and talking of redeploying staff. Management will not rule out lay-offs if things get worse.

Any problems at Macquarie Bank will go though the market like wildfire - as Australia's only world-class investment bank it has innumerable connections with almost every leading business. Not to mention of millions of customers and investors.

What's wrong? First of all the bank has had some very public failures. A Macquarie hedge fund called Fortress is making severe cutbacks to secure its financial position. Worse still, a series of funds called the ALPS funds - pitched as high-yielding funds for small investors - is getting into all sorts of trouble as the US market throws up one disaster after another.

More worrying, investors are shunning "financial engineering" stocks such as Macquarie - MFS, a group that liked to style itself as a "junior Macquarie" has collapsed spectacularly with its former executives now being chased down by Citigroup to pay back loans.

But that's just what we see on the surface. It's the more subtle signals at Macquarie that are really turning heads in the market.

Sure, Macquarie has been sold down. But all banks have been sold down since the start of the year. The difference with Macquarie Bank is that it has been dumped.

At the end of last week Macquarie was not just underperforming the ASX, it was underperforming a string of global investment banks that have released the sort of bad news that would put Macquarie's seemingly marginal troubles at Fortress and ALPs to shame.

For example, Macquarie has fared worse than Bear Sterns, the Wall Street bank which is receiving emergency funding this weekend.