Top Firm Urged To Sell or Close Down Securities Businesses

Macquarie Group would gain from selling or closing its underwriting and loss-making securities businesses, according to UBS, which upgraded its rating on Australia’s largest investment bank to buy from neutral.

Bloomberg reports that closing the two units, which were responsible for Macquarie’s 2012 profit falling to an eight-year low, or moving to a capital-light advisory model that excludes backing share and bond sales, would raise its valuation, UBS said.

Ongoing losses after bonuses 'across its equities and investment banking businesses will inevitably force Macquarie’s management and board to reassess its strategy', UBS analysts including Jonathan Mott and Chris Williams said in a note to investors released Wednesday. They expect the two units to lose $321m in the year to March 2013 and not return to profit in the foreseeable future.

Macquarie - which also has funds management, lending and leasing, banking and fixed income, currencies and commodities trading businesses - has joined banks including UBS and Credit Suisse Group AG (CSGN) in cutting jobs to save on costs as trading and mergers and acquisitions dwindled, Europe’s debt crisis roiled markets and China’s economic growth slowed. In Australia, announced mergers and acquisitions fell in 2012 to the lowest since 2009, data compiled by Bloomberg showed.

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