MACQUARIE GROUP'S highly conditional 2013 outlook statement that profit would be better than in 2012 has failed to inspire investors, who pushed the stock lower than the overall market.
The challenges for Macquarie are many, particularly given two of its star performers, the securities business and capital business, are suffering badly due to tough market conditions.
To put it into context the two businesses at their peak contributed combined profits of $2.8 billion and last year they made a combined loss of $100 million. Worse, Macquarie boss Nicholas Moore warned that the securities business could make another loss this year.
The upshot is despite the company boasting that its first-quarter trading result was better than the previous corresponding period, it is coming off a low base and the result is worse than for the final quarter of 2012.
Like its investment banking counterparts, Macquarie has been doing it tough since the global financial crisis. It is now trading a $23.87, which is a long way from the $86 heights it scaled back in October 2007, the $55 it bounced along at in October 2009 and the $42 a share it traded at in February 2011.
What is even more telling is that the stock is trading below the company's reported net tangible asset of $28.12 as at the March 31, 2012, balance date. Indeed, its return on NTA is likely to be between 8 per cent and 9 per cent this year, which explains why it is trading below NTA.
Moore has been in the top job since May 2008 and the pressure cannot be underestimated. To put it into perspective, between 2007 and 2008 the company reported a total profit of $3.3 billion. In the four years since Moore became managing director the company has made a combined profit of $3.6 billion before corporate expenses, on an increasing capital base.
Moore's comments that 2013 was set to be better than 2012, was predicated on factors not getting worse globally. That is something he can't control and the way the eurozone and the US are looking, global markets will remain volatile and corporate deals will remain subdued.
Last year the group put the axe through expenses and it seems that is part of the reason why the first quarter of 2013 looks better than the first quarter of 2012. But one swallow doesn't make a summer.