Macquarie Bank has this morning unveiled its biggest-ever earnings surge, lifting 2007 net profit by 60% to $1.46 billion — more than six times what it was making just five years ago.

The conversion of the Millionaires Factory into what is arguably the world’s biggest private equity firm now sees a global empire of more than 10,000 staff managing total assets worth almost $200 billion.

In terms of Australians taking over the world, Macquarie is now clearly in the same league as Rupert Murdoch’s News Corporation and Frank Lowy’s Westfield group. Long may it continue.

Whilst all divisions recorded record results, it is the private equity-style direct trading of assets that has delivered the step-change in profits.

Base fees on the various Macquarie funds are producing a very tidy $800 million a year, but performance fees in 2007 were only about $70 million — the lowest for five years and nothing like the $300 million in 2005.

This is because the bank now often directly buys the best assets for itself and then flips them into associated funds or to third parties. However, Macquarie is keen to stress its wealth creation abilities for everyone, producing the following new calculation this morning:

Since listing, Macquarie Bank and Australian-listed, Macquarie-managed specialist fund vehicles have delivered more than $40 billion in wealth for shareholders, of which more than $30 billion has gone to Australian shareholders. This reflects approximately $22 billion in capital appreciation and $9 billion in dividends.

The sheer scale of the $200 billion global empire that Macquarie manages is also highlighted in the following terms:

Employees: 65,000 across the assets

Real Estate: 700 properties

Airports: 115 million passengers per annum

Toll roads: 1.7 million cars per day

Gas distribution: 6.9 million households

Water services: 5.2 million households

Electricity distribution: 1.2 million households

Communications: 83 million people reached each year

Rail: 2.7 million passengers per annum

Ferries: 6 million passengers per annum

Aged care/retirement villages: 7,500 beds in 7,700 units

Buses: 300 million passengers per annum

The conversion to a giant private-equity fund is best demonstrated by the fact that Macquarie’s mortgage book of $22.25 billion and its loan book of $19.6 billion is now exceeded by its holding of “trading assets and other securities” which rocketed from $17.24 billion to $29.64 billion over the 12-month period.

Profits on asset sales soared from $306 million to $1.4 billion as the bank offloaded shares in the following businesses:

Akeler JV assets, Arqiva, Brussels Airport, Childcare businesses, CH4 Gas, Dyno Nobel, East London Bus Company, Macquarie Small Cap Roads, SFE shares, Steampacket Group, Taiwan Cable TV Investments, RP Data, Macquarie Goodman Group and other infrastructure and real estate assets.

The bank currently has $823 million in equity investments ready for sale, plus $2.9 billion directly invested in its various funds, the biggest being Macquarie Airports, which are enjoying unrealised gains of $1.1 billion, so there’s plenty of scope to make strategic disposals that ensure another record profit is delivered next year.

Shares remain suspended as the bank attempts to bed down another major capital-raising.

Peter Fray

72 hours only. 50% off a year of Crikey and The Atlantic.

Our two-for-one offer with The Atlantic was so popular we decided to bring it back.

But only for 72 hours.

Use the promo code ATLANTIC2020 and you’ll get 50% off a year of Crikey (usually $199) and a year of digital access to The Atlantic (usually $70). That’s BOTH for just $129.

Hurry. Ends midnight this Thursday.

Peter Fray
Editor-in-chief of Crikey

Claim Now