What the analysts are saying: Macquarie Group on Hold

Macquarie Group's planned A$500 million share buyback and other capital management initiatives might spark some interest in the company's stock, but not enough to encourage sell-side analysts to recommend investors buy it.

In their commentaries on Macquarie's 2011/12 results, announced on Friday, RBS, Citi, UBS and JP Morgan all maintained their Hold or Neutral recommendations.

Three of the four downgraded their 2012/13 net profit forecasts.

RBS, which has a price target of $29.63 on Macquarie stock (it closed at $29.27 on Friday), said Macquarie had done a good job cutting costs. "Core expenses were down 13 per cent," it said.

However, "with a five per cent share buyback incorporated into our forecasts, as well as a 15 per cent reduction in expenses, the next leg-up in earnings will need to be driven by revenues and improvement in markets."

RBS is not confident that improvement will come in the 2012/13 year.

Citi has the same view. Its assumptions are based on no significant pick up in M&A activity and the likelihood that equity market turnover and equity funds inflow will remain weak. It said: "There is no evidence of emerging deal flow in Macquarie Capital or Macquarie Securities."

Citi has a price target of $31 on Macquarie stock. It cut its forecast for 2012/13 earnings by two per cent after Friday's results announcement.

It said Macquarie would have to continue to cut costs hard. "Further right-sizing of the group will be needed to match the now extended deleveraging period in many economies."

UBS, which has a price target of $28.50, said it had pulled back its earnings forecasts "to reflect our expectation of a more subdued outlook for investment banking revenues."

JP Morgan has a price target of $30.86 on the stock. Its forecast for net profit in 2012/13 remains unchanged.

It said: "Revenue growth remains a challenge, offset by buyback and other capital management initiatives."