It took just over 45 minutes for the ‘bad news’ to emerge at today’s
Macquarie Bank annual meeting in Sydney. Up till then shareholders
could have been excused for wondering why they were there. After all
readers of The Australian Financial Review this morning would
have had noticed and perhaps skimmed the front page story and the huge
feature in the back of the paper that sold the new Macka bank focus
overseas, and on Asia.

The focus of the story was CEO, Allan Moss and it was a was a skilful
bit of spinning for warming up the annual meeting. But it did make much
of the addresses of Mr Moss and chairman, David Clarke, sound a little
old and repetitious such was the volume of information in the AFR feature.
And it also made some shareholders wonder if the company and management
had treated them a little poorly by speaking to the AFR and stealing whatever thunder shareholders WERE entitled to, and not readers of the AFR.

So while pausing to listen to readers from the AFR from Messrs
Clarke and Moss, I waited for the ‘BUT’ word or something similar, that
change of tone that signals the approach of bad or adverse news.
And around 45 or so minutes from the start of the meeting and well into
the speech by Allan Moss, there it was, on Page 29, immediately after
the news of first quarter earnings up and a forecast of a result for
the half to September that would be in line or just above the previous
corresponding period. That was the news investors focussed on and
marked the shares 60c higher mid-afternoon to well over $32.

But those looking out a little further than the end of their nose
should take heed of the warning (also implicit in the profit
announcement last May) that “Repeating last year’s excellent second
half will be challenging (a word loved by the Mackas) because it
benefited from: “Very buoyant equity market conditions in Hong Kong and
very large profits from asset realisations especially through Macquarie
Direct Investment”.

That means not many floats of companies where Macquarie Bank has
sizeable direct equity positions, such as Repco and JBI Hi-Fi last year.

And, of course no more bunnies like Fosters with assets to sell.
Remember the way Macquarie Bank scooped up an estimated $100 million in
fees and then scored all those shares at $2 each, when other
institutions paid $2.50.

So what Macquarie is again warning that the lower second half (though
good by their previous efforts) may not be enough to prevent full year
earnings falling below the $494 million figure of 2003-2004, even
though a good first half looks like happening.

But shareholders shrugged that off, and ignored the five separate
groups of questions from long time shareholder activist, now bore, Jack

When he got up to ask his last few questions, people started flooding
out of the Lower Ballroom at the Westin Hotel (next door to the Mackas
Sydney headquarters) for the snacks and tea and coffee outside.
The meeting went for more than two and a quarter hours and it had
nothing of the passion of the past two years. No miners from the Hunter
Valley complaining about Nardell Colliery, and no shareholders
attacking the board over poor performance, like last year and the year

Prior to the start, Messrs Clarke and Moss did a walk about and posed
for the still and television cameras, and it had some of the gloss of a
revivalist meeting as a ‘saintly’ looking Al, meeted and greeted people
in the front row while the very urbane opera lover and wine lover, Mr
Clarke, moved about with a certain panache.

Likewise with the speeches. A polished Mr Clarke started proceedings
and then handed over to an initially hesitant CEO, who discovered his
rhythm, clasped his hands at times, looked to the heavens for
inspiration when talking about the outlook, and gave a much better
performance as his speech went on.

By the time shareholder questions came around Clarke batted or snicked
the hard ones to Mossie, who stood, gestured, asked for slides to be
recalled (number 43 was his favourite, at one stage asking for it to be
left up for a while. It was the slide of the Macquarie business mix and
vindicated the approach that Moss has taken over the years and been
paid millions in salary and shares and options and performance fees).

Such was his confidence that the old stager seemingly wanted more, even
though a nice board lunch approached. There was nothing
especially frightening. no ghosts of employees past with axes to grind,
a la last year and no impertinent journalists.

Perhaps the most interesting feature was the way Clarke and Moss raved
about the risk management procedures. The explanations went on and were
made at numerous times (such as Moss saying risk management issues was
the most important issue of his day, every day). It made you
wonder if there was something smelly and not disclosed, or perhaps it
was meeting the Ghost from Melbourne, or as one shareholder and Mr
Clark both described it “another unmentionable company.”

Yes, the NAB and its appalling risk management that cost it $360 in
forex options losses, a chairman, CEO and several directors. A
very real ghost, even for successful banks.