Macquarie also increased its dividend pay-out ratio in response to its strong cash position, but said it was under no pressure to deliver a capital return to shareholders.

Managing director Allan Moss said the second half would be broadly in line with both the first half and the 1997-98 second half, which came in at A$76.9 million.

This would lead to a full-year profit around A$157-A$161 million compared with A$141.2 million last year, in line with analyst's current forecasts.

However, two analysts told Reuters they expected to revise their full-year forecasts and noted that Macquarie traditionally performed better in the second half.

Moss said all the bank's main business groups were profitable in the first half although the contribution from its equities division fell, due mainly to the decline in trading volumes in Hong Kong.

Hong Kong should remain profitable in the second half, but would continue to trade below last year, he told a briefing.

The share price improved immediately after the result but later fell back to close eight cents down on the day at A$13.67.

Analysts said some sections of the market may have expected the announcement of a capital return.

Macquarie increased its interim dividend payment to 30 cents a share from 21 cents, saying it had decided to increase its dividend payout ratio to 65-70 per cent of earnings from 55-60 per cent.

Moss said the change reflected the strong capitalisation of the bank, which has a capital adequacy of 18 per cent compared with the eight per cent regulatory minimum.

However, he said the bank's 26 per cent return on equity was very high.

"There's no pressure for us to return capital," he added.

Macquarie is expected to add further to its surplus capital with the sale of its PUMA home mortgage securitisation business, which it put on the block in October.

Moss declined to give details of the sale process, with final bids due by the end of the month, but the bank said it would consider instalments rather than a lump sum payment.

Elsewhere, Moss said Macquarie would look to grow selective businesses in Asia, particularly North Asia, during the current regional downturn.

He believed the Australian economy remained in good shape, and although growth could be expected to slow, this was unlikely to have a big impact on the bank.

Moss also said he was optimistic about an improvement in the medium term in the bank's equity funds management division, which it has bolstered in recent months.