By Boyd Erman
The outlook from Macquarie Group (OTC:MCQEF) for its markets businesses is grim globally, but there are bright spots when it comes to the Australian financial giant's operations in Canada.
The firm released an update overnight on its performance in the year ending in March, and it was much worse than analysts expected as global markets have deteriorated and cut activity. The company is now predicting that operating income from Macquarie Securities, which includes its equity trading business, will be down 35 per cent, as activity is plunging in the final six months. Equity capital markets revenue and stock trading commissions are dropping fast.
Operating income from Macquarie Capital, which includes its mergers and acquisitions advisory service, is also down.
The firm is cutting costs in response, looking to slash outlay by as much as 25 per cent from 2011 levels by fiscal 2013.
In the last nine months, headcount in securities is down 10 per cent, and down 6 per cent in capital, as the firm has pulled back from businesses in areas such as derivatives.
What does it mean for Canada? Macquarie has been one of the big spenders in Canadian capital markets in the past few years, hiring traders, bankers and financial advisers and making acquisitions of financial services firms as it rapidly builds a big presence.
Parsing the presentation, it appears Canada remains a bit of an island. On the equities side, Macquarie's resource-oriented equity capital markets business in Canada is listed as a focus in the "going forward" section.
On the private wealth side, where Macquarie has been bidding for advisers to add to its network, growth remains a "key initiative," according to the presentation, and the Canadian wealth arm is listed as a "core business."
Macquarie may not be spending in Canada like it once was, but it doesn't appear ready to give up.