* H2 profit A$553 mln vs A$541 mln expected by analysts
* Signals worst may be over; Dividend 100 cents
* Says to eye buying businesses being sold by big Europe banks
* Shares rise as much as 2 pct
* Says expects higher 2012 earnings, subject to market conditions (Adds comments from CFO interview, updates shares)
By Narayanan Somasundaram
SYDNEY, April 29 (Reuters) - Macquarie Group , Australia's largest investment bank, forecast profit growth for 2012 and said it may look at buying trading and investment banking businesses in Europe in a move to further cut its reliance on the home market.
An acquisition spree in the United States has lifted contributions from that market to 30 percent of Macquarie's revenues and cut Australia's contribution to 40 percent, but the European business has lagged with a 14 percent share.
Macquarie, which has A$3 billion ($3.3 billion) in surplus capital that gives it room for acquisitions, will eye buying trading and investment banking businesses that may be hived off by big banks in Europe, its Chief Financial Officer told Reuters. [ID:nL3E7FT0XX]
The bank on Friday unveiled its second annual profit fall in three years but said it would not cut staff, an optimistic sign as it emerges from the worst downturn in its trading history.
Still, the challenge for CEO Nicholas Moore is to lift the return on equity, now at a 10-year low, by reallocating capital to productive businesses, while fending off calls for job cuts with some investors feeling the bank bulked up prematurely.
The bank said its equity-trading driven securities business that saw a 70 percent fall in annual profits, and marquee investment bank will perform better this year as markets revive.
That initially boosted Macquarie shares as much as 2 percent before they trimmed gains to end 0.7 percent higher at A35.16 amid some investor caution.
"I wouldn't yet ring the bell and say they have hit the bottom," said Paul Biddle at Celeste Funds Management . " The results say if you are an investor you sit but it still doesn't spur one to go and buy."
The other divisions of lending, asset finance, funds and fixed income and commodities would be up or broadly in-line with 2011, it said. Thomson Reuters I/B/E/S estimates a net profit of A$1.25 billion in 2012, versus A$956 million in 2011.
Citigroup analyst Wes Nason said consensus estimates appeared a touch optimistic for 2012, given first-quarter M&A and equity underwriting activity in key markets.
"Consensus estimates assume notably faster growth rates for Macquarie than for international peers," he said.
Macquarie's results follow sharp earnings declines for bigger rivals such as Goldman Sachs and Morgan Stanley , which were also roiled by falling trading revenue.
Macquarie shares, which have seen only four annual falls in the past 14 years, rose as high as A$35.60 after the bank delivered a higher-than expected dividend and upbeat outlook.
MOMENTUM PICKING UP
Macquarie said net profit in the second half fell 3.2 percent to A$553 million, which compared with a Thomson Reuters I/B/E/S estimate of A$541 million.
Improving market conditions helped achieve the beat, and Macquarie said business momentum was picking up and could lead to a better result this year.
The securities business saw its profits contribution fall 70 percent to A$175 million.
Macquarie, which used to be called the "Millionaire's Factory" for its generous banker pay, said subdued equity market conditions were showing signs of improvement and the deal pipeline in its investment bank was promising.
"The pipeline is definitely better than this time last year. We have signed more mandates than last year," Chief Financial Officer Greg Ward told reporters.
Macquarie's investment bank, which has for years topped the Australian investment bank league tables, is slipping as top dealmakers retire or quit in an indication that lower-than expected bonuses are irking bankers.
Thomson Reuters data shows Macquarie stands at No.5 in the
Australia M&A league table so far in 2011, down two spots and
behind Deutsche Bank
Macquarie, seeking to transition from a managed listed-funds model to a traditional investment bank, warned in February that its full-year profit may miss market expectations. It said the risk appetite of clients was improving though there was quite a long way to go before normalcy returned.
With slipping profits, the group is 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.
Macquarie pays bankers an average of A$300,000 a year, or about 40 percent lower than global rivals, a Nomura report said, adding the it would need to cut less efficient staff to retain key talent. ($1 = 0.915 Australian Dollars) (Editing by Dhara Ranasinghe and Muralikumar Anantharaman)