Macquarie Bank Limited

News Release

Friday May 25, 2001

Macquarie Bank today announced a $242.0 million profit after tax attributable to ordinary shareholders for the year to March 31, 2001.

This is an increase of 15.1 per cent over the $210.2 million profit for the year ended March 31, 2000 and represents a return on average ordinary shareholders' funds of 27.1 per cent per annum.

Profit before tax attributable to ordinary shareholders rose to $296.0 million from $289.3 million. Earnings per share increased 11.7 per cent from 124.3 cents to 138.9 cents. Macquarie Bank Executive Chairman David Clarke said $1,000 invested in Macquarie Bank on its formation in 1985, reinvesting all dividends, would now be worth over $80,000, representing a 30.8 per cent internal rate of return.

"This result, which maintains the Bank's 10 year record of annual increases in profitability, was achieved through strong growth, both domestically, and in international markets where revenues were 68 per cent higher than last year," Mr Clarke said. "The Bank's geographic spread of businesses, as well as its diversity of operations across markets, has delivered another outstanding result despite lower levels of activity in some sectors and the absence of any significant asset sales. "

"International revenue now exceeds $400 million. This high level clearly demonstrates Australia's effectiveness as a financial centre - one from which the export of financial services is being achieved competitively on a world stage. Bipartisan government support for financial services, through deregulation and the provision of an open, secure, low cost and technologically advanced marketplace has more than doubled Australian financial services exports over the past five years," Mr Clarke said.

"The Bank's Asset and Infrastructure, Treasury and Commodities, Equity Markets and Banking and Property Groups all produced record profits.

"Corporate Advisory and Institutional Stockbroking also had another very good year, while Funds Management increased its contribution to earnings from 2000 levels.

"As forecast, the Financial Services Group - established in June 2000 to realise the Bank's potential in wealth creation for retail clients - reported a modest loss, with technology investment and change initiative costs tracking according to our business plan.

Macquarie Bank Managing Director Allan Moss said the Bank's international operations had an excellent year, contributing 29 per cent of the Bank's operating income, and 38 per cent of profits. "Our strategy of selective expansion outside Australia continues to be successful, and we have now achieved a 12 fold increase in international operating income over the past five years," Mr Moss said.

"International income is derived from a widening range of business activities, primarily across Asset and Infrastructure, Equity Markets and Treasury and Commodities. With all Groups now undertaking international activities, we expect further diversification in our earnings from our presence in 22 international locations.

"The Bank's momentum has also been underpinned by growth in specialist asset fund classes such as infrastructure, where funds under management rose by 94 per cent to $5.0 billion, including an outstanding performance by the Macquarie Infrastructure Group (MIG). Property funds under management also grew rapidly, by 31 per cent, to $2.6 billion following the successful formation of the Macquarie Goodman Industrial Trust."

"This is an exciting area for the Bank and further opportunities in specialist funds include the Macquarie Airport Group (a fund to be seeded with the Bank's 50 per cent holding in Bristol Airport in the UK), and other asset types currently being investigated.

"Organisationally, the Bank earlier this month announced the merger of its Asset and Infrastructure and Corporate Advisory and Institutional Stockbroking Groups to form a new Investment Banking Group, bringing together our wholesale structuring, institutional stockbroking and advisory capabilities.

"This new Group will comprise around 1000 staff, accounting for nearly 50 per cent of the Bank's earnings. The reorganisation will facilitate the Bank's continued growth domestically, and particularly internationally. We are confident that combining these resources will not only accelerate growth in these particular market sectors, it will give us the opportunity to deepen relationships with new and existing clients."

We are aiming to grow our advisory businesses in Asia, Europe, and North America. Domestically, the AIG infrastructure specialisation will benefit from the addition of CAIS public market products, especially underwriting and mergers and acquisitions."

FINANCIAL HIGHLIGHTS

In accordance with its announced distribution policy, the Bank has declared ordinary dividend payments of 93 cents per share for the year, comprising an interim dividend of 41 cents per share and a final dividend of 52 cents per share, both franked to 70 per cent. This is a 7 cent increase over the dividends for the year ended March 31, 2000, of 86 cents per share.

Given the significant growth in the Bank's activities, which is expected to continue, the Bank has decided not to undertake a buy-back of shares in respect of this half year.

Total operating income for the year was $1,455.9 million up from $1,186.5 million for the previous year. Fee and commission income rose by 29.3 per cent to $855.4 million from $661.4 million, while trading income also made a major contribution to increased revenue, rising 60.0 per cent to $429.1 million ($268.1 million last year). Interest income was marginally lower at $179.1 million, compared with $186.8 million last year.

Total operating expenses were up 27.7 per cent to $1,130.6 million. This includes accommodation expenses which rose 45.1 per cent, employment expenses which rose 23.8 per cent and other operating costs which were 39.7 per cent higher. Average staff numbers grew by 19 per cent from 3,595 to 4,269.

Funds under management were $30.9 billion at 31 March 2001, an increase of $4.6 billion over 31 March 2000.

GROUP OPERATING HIGHLIGHTS

• The Asset and Infrastructure Group (AIG) was again at the forefront of domestic and international infrastructure, structured finance and cross border leasing deals, with the Project and Structured Finance Division (PSF) completing more than $21 billion in transactions. PSF was recognised by Privatisation International magazine as the No 1 Australasia Infrastructure Financial Adviser in 2000 and by Project Finance International as the No. 2 Global Financial Adviser. A highlight for the Group was the $100 million acquisition of Bristol Airport in the UK - the seed asset for the Bank's airport fund. AIG also led the ABB/Powerlink/Macquarie Bank consortium on its $938 million acquisition of the South Australian electricity transmission assets, ElectraNet and acted as adviser and underwriter to NextGen on the construction of an $853 million fibre cable. Cross border leases included numerous aircraft leases for the world's leading airlines, rolling stock for Austrian Rail and rail facilities for Belgian Rail. Infrastructure and Specialised Funds (ISF) now has $5.0 billion in funds under management through vehicles including the Macquarie Infrastructure Group (MIG) which during the year reached financial close on the Midland Expressway.

• A record Treasury and Commodities Group result reflected a diverse income stream and a strong second half from Metals and Mining in precious and base metals. Benefits from the 1999 acquisition of the investment banking businesses of Bankers Trust Australia continued to flow through the Group in Agricultural Commodities, Debt Markets, Foreign Exchange, Money Market and Futures. Risk Advisory Services increased debt under management from $850 million to $2.6 billion.

• Equity Markets Group achieved an excellent result, with most of its revenue derived from international markets, particularly Hong Kong, South Africa and Europe. In Hong Kong, the Group maintained its position as No 1 in listed warrants and its leading market share in exchange traded option market making. The South African joint venture with Standard Bank is also the leading warrant issuer and largest market maker in over the counter structured equity derivatives products. First year results from the European business - which has concentrated on arbitrage activities in all the main European markets - exceeded expectations. The Group has also recently commenced equity derivatives trading in Brazil from the Bank's office in Sao Paulo. Despite subdued trading conditions in Australia, Equity Markets maintained its position as the No 1 ranked warrant issuer and was ranked No. 1 for equity derivative products by AsiaRisk magazine.

• Corporate Advisory and Institutional Stockbroking Group increased revenue, despite a lower level of activity in Australian equity issuance markets and lower levels of market turnover generally. The mergers and acquisitions team had a very strong year, advising more than 120 clients on 150 mandates worldwide, completing transactions for a total value of more than $17 billion. Transaction highlights included advising Rio Tinto on its successful hostile takeover of North and advising Southcorp on its acclaimed acquisition of Rosemount. Equity Capital Markets continued to improve its market share in a weak market overall, ranking No. 2 in the Australian market for equity raised and No 1 for IPOs. Highlights of the year included the appointment as a joint lead manager for the NRMA float and joint lead manager of the $350 million Austereo spin-off by Village Roadshow. The Group continued to enjoy a leading position in the convertibles market, completing innovative hybrid issues for Bank of Queensland, Coles Myer and Toll Holdings. Macquarie Equities experienced subdued markets following the fall in the technology sector but continued to improve its ratings on institutional panels both domestically and internationally. Equities Research extended its reach, with additional analysts in Hong Kong, New York and London to cover developments in specialist industry sectors.

• The Banking and Property Group posted a record profit, with all businesses - Property, Banking, Mortgages and Securitisation, and Golf and Leisure making strong contributions. A highlight was the formation of the partnership, Macquarie Capital Partners LLC, between Macquarie Property and the US-based real estate investment company Security Capital Group Inc, which will access US capital markets. Property Finance wrote a record $510 million in new loan business while Medallist Golf Developments and Property Investment Banking enjoyed record earnings. Property Investment Management successfully merged the Macquarie Industrial Trust with Goodman Hardie Industrial Property Trust to create the largest listed industrial property vehicle in Australia. Property trust funds under management increased by 31 per cent to $2.6 billion. The Mortgages Division increased the number of loans managed to over 62,000, with an outstanding balance of more than $8 billion, while Banking's record result was driven by increased loan business and cost efficiencies from internet banking services.

• Funds Management Group achieved a satisfactory result, and continued to be a market leader in enhanced equities, with its leading position in fixed interest and listed property endorsed by awards from Morningstar and InvestorWeb. Significant improvements were achieved in the active Australian equities funds management process and in recent performance. The Group won a number of large mandates for diverse investments. A satisfactory profit was recorded from the Group's Malaysian joint venture with Arab-Malaysian Merchant Bank despite difficult market conditions and the Group began a new joint venture with IMM Asset Management in Korea. Total funds under management grew by 5 per cent to $22.8 billion - comprising $12.7 billion for wholesale clients and $10.1 billion on behalf of the Financial Services Group.

• Financial Services Group (FSG) achieved significant milestones in moving to realise the Bank's potential in wealth creation and management. Its aim is a completely integrated customer-centric approach to retail financial services. As previously foreshadowed, the Group reported a loss following planned technology and operational efficiency investments. The FSG restructuring is proceeding to plan. Highlights included exceeding $1 billion in funds under management from the Macquarie Portfolio Manager "Wrap" product, strong growth at the premium end of the financial planning business and the launch of tradingroom.com.au, a joint venture with Fairfax's online presence, f2. The Macquarie Cash Management Trust remains the leader in its field in Australia and grew to over $7 billion.

• Macquarie Direct Investment Division's (MDI) earnings were below 2000 levels, with the Division reporting a single completed realisation - the IPO of Hermes Precisa Australia, which resulted in very satisfactory returns. A landmark transaction, the investment in SCI (Australia) by a syndicate of investors led by MDI is one of the largest ever management buy out transactions to have occurred in Australia (total enterprise value - $260 million). The fund raising for Macquarie Investment Trust III yielded total commitments of $220 million - exceeding the initial goal of $150-$200 million. The Division is well positioned for further growth.

OUTLOOK

Mr Moss said the Bank was not expecting the economic downturn to be severe or extended. "We are confident of maintaining or improving our market position. We will be continuing to expand, both domestically and internationally."

"Factors which may influence short term performance include management performance fees earned by the Bank's listed Macquarie Infrastructure Group, equity markets activity and the level of the Australian dollar."

Based on the continued good progress of our domestic and international businesses, we are positive about the medium to long term outlook."

For further information, please contact:

David Clarke, Executive Chairman, Macquarie Bank Limited	02 8232 3410
Allan Moss, Managing Director, Macquarie Bank Limited	02 8232 3483
Richard Sheppard, Deputy Managing Director, Macquarie Bank Limited	02 8232 3183
Greg Ward, Chief Financial Officer, Macquarie Bank Limited	02 8232 3543
Lisa Jamieson, Public Relations, Macquarie Bank Limited	02 8232 6016
Matthew Russell, Public Relations, Macquarie Bank Limited	02 8232 4102

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