insto - Australian financial markets

Macquarie’s admission that market conditions were taking a toll on performance saw shares in the investment back fall to a 12 month low last week. The investment bank’s chief financial officer Greg Ward was reported as saying that while it was too early to forecast implications for full year earnings, some of the bank’s businesses were battling uncertainty. Ward told a UBS conference that it was “too early” to evaluate the impact on full-year earnings. Macquarie posted a $1.05 billion profit for 2010 in April.

Bendigo and Adelaide Bank is facing a class action launched by 1700 investors in failed managed investment scheme Great Southern. The action, launched by law firm Macpherson and Kelly, aims to recover principal and interest on loans paid into the MIS. Bendigo managing director Mike Hirst said the bank had acted within the law and was looking forward to refuting the claims in court.

Australian coalminers have declared their hand, making a joint $4.85 billion cash offer for Queensland’s rail-track network. The group of 13 firms, headed by industry giants Rio Tinto, BHP Billiton and Xstrata, are attempting to head off Queensland Government plans for an IPO of the assets, valued at around $7 billion for the above and below rail components. The Government has indicated it wants to sell the integrated assets in the IPO. The miners' group calls itself the Queensland Coal Industry Rail Group and is chaired by former NSW Premier Nick Greiner.

The Commonwealth plans to sell $56 billion of government bonds in the fiscal year beginning July 1, up from $54 billion in 2009-10. The increase is less than had been anticipated due to the budget’s earlier than expected return to surplus. Treasurer Wayne Swan’s budget revealed that government debt would peak at 6.1 percent of GDP in 2011-12, and would be eliminated by the 2012-13 financial year.

Bond markets were quiet last week with attention focused firmly on the federal Budget and eurozone debt woes. RESIMAC priced the first low-doc RMBS issue since 2008 after the budget. It was oversubscribed and the AOFM got only $10 million worth of the issue, despite standing ready to take up to $125 million under its RMBS support plan.

Tuesday

Federal budget
Treasurer Wayne Swan delivered a cautious budget that included the politically all-important early return to surplus.

Macquarie has named the materials and healthcare sectors as prime areas for M&A over the next year. In materials, Macquarie has nominated Boral Worley Parsons and Adelaide Brighton as corporates with M&A ambitions while it says that cashed-up healthcare firms could look to Europe for potential targets. Sonic Healthcare could bid for Germany’s Labor Leverkusen, while Ansell might look for opportunities for its occupational division.

NAB is planning to float its UK operations to raise funds to buy more than 300 branches being sold by RBS, according to British reports. The UK float of Clydesdale and Yorkshire Bank could raise as much as 2 billion pounds. NAB is yet to confirm its interest in the RBS branches. UK reports have also linked Virgin Money as a potential bidder for the network.

The World Bank priced on Wednesday the reopening of their Nov 2016 and Dec 2019 bond lines, which marks the organisation’s return to this market after it issued an A$1.5bn 5.75pct Feb 2015 benchmark earlier this year.

The new offering was launched with an initial target total size of A$600m across both tranches. Due to strong demand the total increase size across both tranches reached A$1.4bn.

Distribution:
• Australia 61pct
• Asia 21pct
• Europe 16pct
• North America 2pct

The Australian Financial Review’s Quarterly IPO survey shows that in the first quarter of 2010, nine out of 14 initial public offerings rose on debut. According to the AFR, the 14 companies raised a combined $433 million, the bulk of it from the $300 million capital raising for Macquarie Group’s 34 percent interest.

HSBC is set to take on the Big Four banks in the retail market and could open as many as 100 branches across Australia, according to the Sydney Morning Herald. The SMH says HSBC is starting with new branches in North Sydney and Canberra in coming weeks, and has plans to open as many as 10 branches a year every year through to 2010, taking its network from 24 currently to around 100. HSBC has not opened a new branch in Australia since 2002, but reportedly sees an opportunity as immigration continues to grow from countries where it has a major presence.