Macquarie Bank Limited

News Release

Thursday November 16, 2000

Macquarie Bank today announced a $107.9 million profit after tax attributable to ordinary shareholders for the half year to September 30, 2000.

This is an increase of 18 per cent over the $91.5 million profit for the half year ended September 30, 1999 and represents a return on average ordinary shareholders' funds of 24.5 per cent per annum.

Profit before tax attributable to ordinary shareholders rose to $139.2 million from $122.7 million, an increase of 13 per cent.

"This is another strong result achieved in varied market conditions and characterised by growth in revenue from our expanding suite of offshore businesses which accounted for 31 per cent of revenue for the half year," said Macquarie Bank Executive Chairman David Clarke.

"The half year was marked by important organisational changes including continued international expansion and progress of the restructuring in the Financial Services Group, the Bank's focal point for marketing, sales, advisory and customer service to the retail market.

"During November, we have also announced the merger of our Corporate Finance and Equities Groups to form Corporate Advisory and Institutional Stockbroking Group (CAIS) and the formation of a separate Equity Markets Group. The CAIS Group will service the Bank's wholesale clients through a more tightly integrated offering of corporate advisory and stockbroking services," Mr Clarke said.

All business Groups made solid contributions to earnings except the Financial Services Group, which, as previously foreshadowed, incurred a modest loss.

The Equities Group had an outstanding half year, achieving record profits, with domestic and international equity markets businesses performing particularly well.

The Asset and Infrastructure Group's contribution was marginally lower than the previous comparable period, while Treasury and Commodities Group increased its contribution with notable performances from the Debt Markets and Agricultural Commodities Divisions.

The Banking and Property Group had a record result, while Corporate Finance Group earnings were affected by the timing of fees in advisory businesses and subdued market activity. The Funds Management Group had a satisfactory result, reporting on the first six months under its new structure.

Macquarie Bank Managing Director Allan Moss said substantial increases in earnings in some areas of the Bank more than offset the effects of reduced activity in a few markets during the period.

"We are especially pleased by the performance of our international activities and by the businesses and teams acquired as part of the Bankers Trust investment banking businesses (BTIB).

The half year result included an increase in international revenue to 31 per cent of total revenue from 21 per cent in the previous corresponding period.

"Our strategy of selective expansion into niche markets offshore has paid off handsomely during the period," Mr Moss said. "The offshore performance of the Bank's equity derivatives businesses, particularly in the Hong Kong markets, was outstanding, while the Asset and Infrastructure and Treasury and Commodities Groups performed strongly in international markets."

The Bank declared a 41 cent dividend for the half year, franked to 70 per cent. This is a 21 per cent increase over the dividend for the half year ended September 30, 1999, of 34 cents per share. The dividend for the first half represents a pay-out ratio of approximately 67 per cent of net profit after tax attributable to ordinary shareholders.

A new distribution policy which is designed to maximise shareholder value in the current investment environment has also been announced. Under this policy, the Bank has moved away from a payout-based dividend policy and will not increase dividends above the current level of 93 cents per share for a full year until it is able to fully frank an increase. The Bank will supplement these dividends with a program of regular, six-monthly on-market share buybacks so that the total will represent up to 100 per cent of each period's earnings.

The first on-market share buyback will involve shares worth up to $36 million and will commence on 1 December 2000. The Bank is examining the introduction of a share sale facility. This facility would allow shareholders to sell a small portion of shares, if they wish, without incurring transaction costs.

HIGHLIGHTS

Total operating income for the half year was $671.5 million up from $525.0 million for the previous corresponding half. Fee and commission income made a major contribution to earnings, rising by 17.1 per cent to $378.4 million from $323.2 million. Trading income rose to $203.8 million from $109.5 million; key drivers to this increase being a full period contribution from the Bankers Trust investment banking businesses and strong performances by the Equity Markets business. Net interest income was $99.3 million, up from $86.7 million in the half year to September 30, 1999.

Total operating expenses were $517.5 million, compared with $402.6 million for the previous corresponding half and with $482.5 million for the half year to March 31, 2000. This includes employment expenses of $357.0 million, which rose from $278.6 million in the previous corresponding period and from $347.1 million for the half year to March 31, 2000.

The rise in employment expenses was attributable to a significant rise in staff numbers in August 1999 - the effect of which was only partially reflected in the result for the half year to September 30, 1999, and is now fully reflected in the result for the six months to September 30, 2000. The increase also reflects an 11 per cent growth in staff numbers between September 30, 1999 and September 30, 2000, and increases in compensation costs per employee.

OPERATING HIGHLIGHTS

• A record Equities Group result was achieved in variable market conditions, with lower levels of activity in Australia offset by stronger international markets. Equity Markets Division had an excellent first half with good contributions from Hong Kong and South African markets. Macquarie Equities was ranked number two in the Australian market in terms of Australian Stock Exchange brokerage, while Macquarie Research improved its market penetration from consolidated research activities.

• Asset and Infrastructure Group recorded another good result, although earnings were below the particularly strong comparable period in 1999. The Group's earnings were again derived from a diverse range of domestic and offshore businesses. Project and Structured Finance strengthened its international project finance standing, and was ranked a top three worldwide adviser by Privatisation International magazine. Infrastructure and Specialised Funds was again at the forefront of a number of significant international infrastructure deals, including the establishment of a joint company with South Africa's Old Mutual Asset Managers to manage a wide range of infrastructure investments in Africa and financial close on Macquarie Infrastructure Group's $2.2 billion Midland Express project in the UK, one of the world's largest privately developed toll roads.

• The Treasury and Commodities Group result was up on the half year to September 30, 1999 although the previous result did not reflect a full period contribution from the former BTIB businesses. The Agricultural Commodities business, one of those acquired through last year's BTIB acquisition produced an excellent result as did Debt Market Division, its earnings reflecting a steady flow of capital market deals. Foreign Exchange, Futures and Money Market were solid performers. Metals and Mining's result was lower than the previous corresponding period due to difficult trading conditions.

• The Banking and Property Group had a successful half year maintaining strong earnings from Property Finance Division's risk participation lending program. Property Investment Management Division benefited from the continued success of the direct syndication product, and earned fees related to investment outperformance of its listed trusts under management. The successful merger of the Macquarie Industrial Trust with Goodman Hardie Industrial Property Trust to form the Macquarie Goodman Industrial Trust created Australia's largest listed industrial property trust with assets of more than $1 billion and was overwhelmingly endorsed by unitholders. Banking Division had a record first half. The Medallist golf course related residential property development business made good progress on projects in both Australia and the US. The mortgages, securitisation and margin lending businesses improved profitability.

• Corporate Finance Group completed a number of significant mandates including advice to Rio Tinto on its successful takeover of North Limited, Air New Zealand's acquisition of 50 per cent of Ansett and the listing of Billabong International Limited. Equity Capital markets completed 10 transactions during the half in what was a subdued environment. Of particular note was the successful listing of the NRMA, the largest initial public offer of the year, to which the Bank was appointed Joint Lead Manager.

• The newly structured Funds Management Group reported a solid half, with total funds under management increasing to $21.7 billion, comprising $11.7 billion in wholesale funds and $10.0 billion in retail funds. The Group continued to follow its strategy of providing a diverse range of investment styles and pricing structures for clients. A record of long-term success in the enhanced equities and listed property sectors was maintained during the half through first quartile performance over three years. While performance in active equities funds did not meet expectations, the Bank remains committed to the Price for Earnings Growth (PEG) investment philosophy and will continue to make further refinements to the PEG process to ensure Macquarie is at the forefront of active equities management in Australia. Offshore, the Malaysian, Korean and South African funds management businesses progressed well.

• The Financial Services Group made significant progress in scoping its major systems and marketing requirements, with first half costs lower than expected. As previously announced, a substantial expenditure program is planned in this area over the next two years. Macquarie Adviser Services made a modest contribution to the result and had particular success during the half year with the continuing rollout of the Macquarie Portfolio Manager, a wrap account for financial advisers and their clients. Funds under management through this service increased from $100 million to approximately $620 million during the half. The Macquarie Cash Management Trust continued to attract significant support from financial advisers, attracting over 15,000 new investors during the half year with growth in funds under management of $670 million. The Private Client Broking Division experienced lower revenues due to lower market volume.

Subsequent to September 30, 2000, the Bank has announced:

• Acquisition of the business of UK-based The Portland Group, leading boutique international specialists in the airport and air transport industry. The acquisition builds on Macquarie's project specialisation in airports in Australia and positions the Bank to capitalise on the worldwide trend towards increasing private sector participation and investment in the sector.

• Appointment of Peter Maher as Financial Services Group head (effective start date late November 2000).

OUTLOOK

Mr Moss said that, as previously advised, the Bank is cautious about the outlook for the second half. "The result for the current half will be affected by asset sales which are unlikely to match the unusually high levels achieved in the second half last year. Increased spending on technology in our Financial Services Group and continued subdued trading conditions in metals markets will also impact on profitability for the full year.

Beyond these factors, it is once again difficult to forecast earnings levels given the numerous external influences on our performance.

"Over the medium and long term we remain confident the Bank will continue to improve its strong position in the markets in which it operates. We are working on a number of exciting opportunities offshore where we are planning boutique acquisitions to speed up our penetration in select markets," he said.

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 3251
Lisa Jamieson, Public Relations, Macquarie Bank Limited	02 8232 6016
Matthew Russell , Public Relations, Macquarie Bank Limited	02 8232 4102

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