* H2 profit A$553 mln vs A$541 mln expected by analysts
* Dividend 100 cents
* Says expects higher 2012 earnings, subject to market conditions
* Securities business profit contribution falls 70 pct on year (Adds details of results, quotes)
SYDNEY, April 29 (Reuters) - Macquarie Group , Australia's largest investment bank, reported a 3.2 percent fall in second-half net profit on Friday that slightly topped expectations as market conditions improved, and tipped a higher result this year.
Macquarie, which used to be called the "Millionaire's Factory" for its generous banker pay, said subdued equity market conditions continued to impact its securities business while the value of deals completed in its investment banking business rose.
"Overall, we expect an improved FY12 result on FY11. However, the FY12 result will be dependent upon market conditions, particularly for Macquarie Securities and Macquarie Capital which are assuming better market conditions than FY11," Macquarie chief executive Nicholas Moore said in a statement.
Macquarie, which warned in February that its full-year profit may miss market expectations, reported a net profit of A$553 million in the second half versus A$571 million a year ago.
That compared with the Thomson Reuters I/B/E/S estimate of A$541 million.
Profits were hit primarily by the equity trading driven securities business. Net profit contribution from the business fell 70 percent over the year, it said.
Macquarie's earnings announcement follows sharp earnings declines for bigger global rivals such as Goldman Sachs and Morgan Stanley which were also roiled by falling trading revenue. [ID:nN21242223]
The challenge for Macquarie's Chief Executive Moore is to lift return on equity which is at a 10-year low by reallocating capital to productive business and fend off calls for job cuts as some investors feel the bank bulked up prematurely.
The profit drop marks the fourth fall in five half-year reporting periods as global volatility and a transition from a managed listed-funds model to traditional investment banking takes a toll.
Full-year net profit was A$956 million, down 9 percent on a year earlier . Thomson Reuters I/B/E/S estimates Macquarie to report a net profit of A$1.25 billion in 2012.
Amid volatile markets, Macquarie has remained focused on building its fixed income, currencies and commodities business into Asia as well as fund management and corporate asset business that spans equipment to aircraft leasing.
But with slipping profits, the group is also facing calls to trim its workforce to ensure top talent gets better pay. The group said it had 15,556 employees at the end of March, up from 12,716 two years ago.
The firm, which runs an employee profit-sharing plan that pays more as earnings rise, risks falling well behind main rivals on pay, hurting its capacity to compete, Nomura said in a report.
Macquarie pays bankers an average of A$300,000 ($327,825) a year, or about 40 percent lower than global rivals, the Nomura report said, adding the it would need to cut less efficient staff to retain key talent.
Macquarie said employment expenses rose a quarter during the year and it expected to maintain the employee compensation ratio.
Its Marquee investment bank, which has for years topped the Australian investment bank league tables, is slipping as top deal makers retire or quit in an indication that lower-than expected bonuses are irking bankers.
Thomson Reuters data shows it stands at No.4 in the Australia M&A league table so far in 2011, down one spot. In Asia it is in 10th position, 5 notches below where it ended 2010.
And that is reflecting on its stock. Macquarie shares, which have seen only four annual falls in the past 14 years, are down 5.7 percent so far this year compared to a 2.7 percent rise for the broader index . ($1 = 0.915 Australian Dollars) (Reporting by Narayanan Somasundaram; Editing by Muralikumar Anantharaman and Ed Davies)