Staff cuts needed at Macquarie: UBS

Macquarie Bank may need to shed some staff in the wake of a 25 per cent earnings downgrade, according to UBS analysts.

The group has a high fixed cost base in terms of salaries and other overheads, and any further revenue weakness would amplify the hit on net profits, according to a UBS report.

“A structural cost reduction program appears the only solution, although we acknowledge this has the potential to hurt revenues in the short term, further diluting the bonus pool and impacting retention. Tough decisions now appear necessary,” the report stated.

Since the beginning of the global financial crisis (GFC) Macquarie has bucked the trend of shedding staff, growing its numbers to around 14,600, according to UBS.

But with many of Macquarie’s old revenue streams such as gains on seed investments and listed infrastructure now redundant, its revenues remain subdued.

A significant predicted drop in annualised revenue per full time employee also means Macquarie’s ability to remunerate its staff remains a problem, according to the report.

With more than half of Macquarie’s revenue and most of its growth outside Australia this low compensation capability could become a hurdle for staff retention and recruitment, UBS said.

“We believe that MQG must now actively address its staffing levels to bring it into compensation back into line with global peers,” the report stated.