"Public servants are being "rolled" by banks wanting to make big profits out of public-private infrastructure projects."
October 20, 2005
Richard Gluyas and Glenda Korporaal
INVESTOR sentiment could be turning against the "millionaires' factory" Macquarie Bank, according to a leading firm of stockbrokers, which yesterday downgraded its rating of the nation's largest investment bank.
Goldman Sachs JBWere said Macquarie's recent meteoric rise, as well as its reliance on fees from specialist funds holding infrastructure assets including toll roads, were vulnerable to changes in sentiment and it advised investors against buying the stock.
Goldman said the recent switch in sentiment towards the bank, which has no involvement in Sydney's expensive and under-used Cross City Tunnel, has a parallel in the investor backlash that followed Macquarie's $5.6billion purchase of Sydney airport in 2002.
Macquarie was criticised for paying too much and ramping fees to earn a financial return.
Shares in the nation's biggest investment bank surged to a record high of $78.23 on September 27.
But since then, amid faltering global share markets, it has been mostly downhill.
Yesterday, the bank's stock shed a further $2.41, or 3.7per cent, to $63.51.
Goldman downgraded Macquarie from a buy recommendation to a hold, citing factors including increased competition for infrastructure assets and inferior performance by all of the bank's listed specialist funds.
However, at the same time Goldman Sachs JBWere was downgrading Macquarie to hold, Credit Suisse First Boston was upgrading the merchant bank from hold to buy.
CSFB said there were some valid concerns about Macquarie but they were "overdone".
A Macquarie spokesman said yesterday the bank did not comment on analysts' reports.
Meanwhile, a project management expert warned yesterday that public servants were being "rolled" by banks wanting to make big profits out of public-private infrastructure projects.
Australian Institute of Project Management president David Dombkins called for a halt to new public-private sector projects such as the Cross City Tunnel to allow governments to design more appropriate deals.
These should include lower profits for banks and the inclusion of community service obligation provisions that would allow governments to have a continuing say in the project.
Dr Dombkins said the PPP projects negotiated to date in Australia had all ended up costing at least twice as much as they needed to.
"The deals that are being done don't deliver for the public anyway," he said. "It is the banks that have got control. We have very immature governments in Australia, which are being rolled by the banks."
His comments came as a leading pensioner group joined the growing criticism of public-private sector deals such as the Cross City Tunnel.
Combined Pensioners and Superannuants Association president Morrie Mifsud said many pensioners were concerned at the growing trend for private-sector involvement in government services such as transportation and health.
In a submission to the NSW Public Accounts Committee, the association called for an end to PPP deals used to deliver public services.
"The association calls on all governments to halt this practice and to use public funding to build infrastructure and deliver services on the basis of public need, not private profits or contractual pressure," it said.
© The Australian: