MACQUARIE Group Ltd, Australia's biggest investment bank, said yesterday that it will sell its investment lending business after the global credit seizure pushed up funding costs.
The sale of the unit, a provider of investment funding including margin loans, follows Macquarie's decision in March to wind back its mortgage business, the Sydney-based company said in a statement yesterday. The investment lending unit contributes less than 1 percent of profit.
Macquarie's shares have slumped 48 percent this year as investors shunned indebted financial companies with complex corporate structures. Chief Executive Officer Nicholas Moore said in July it won't repeat last year's record A$1.8 billion (US$1.5 billion) profit, even after avoiding losses on subprime mortgages.
"The cost of funding in this business has gone up significantly," said Brian Johnson, an analyst at JPMorgan Chase & Co. "With a loan book of about A$5 billion, they are not particularly big in this area. In this environment you can't afford to be a small fringe player. It's more sensible to get someone else to fund the business and negotiate a white-label product for Macquarie's clients."
Johnson, rated Australia's second-best bank analyst in a survey of 628 investment managers by Sydney-based financial research firm East Coles Pty last year, has an "overweight" rating on Macquarie, according to Bloomberg News.
Not material
The sale of the unit is not "material" to Macquarie's earnings and will allow the company to focus on its other businesses, the statement said. It is in talks with potential buyers about providing investment loans to Macquarie clients.
Last month, Australia & New Zealand Banking Group Ltd, the nation's fourth-largest by market value, fired workers and cut its equity lending business after an internal investigation into the bank's role in the collapse of Australian margin lenders Opes Prime Group Ltd, Chimaera Group and Tricom.
"It was a business we should not have been in," ANZ Bank Chief Executive Mike Smith said on Thursday. "It wasn't our finest hour."
A margin account is held by a brokerage that lends customers cash to purchase securities.