Macquarie Group, Ltd. · ASX:MQG
Macquarie — Credit Suisse 19th Annual Asian Investment Conference 2016
70 slides from Macquarie's conference presentation, Apr 4, 2016
Slide 1: Investor presentation and outlook update (ASX media release)
Macquarie Group Limited ABN 94 122 169 279 No.50 Martin Place Telephone (61 2) 8232 3333 Sydney NSW 2000 Facsimile (61 2) 8232 7780 GPO Box 4294 Internet http://www.macquarie.com Sydney NSW 1164 AUSTRALIA For personal use only ASX/Media Release Investor presentation and outlook update SYDNEY, 4 Apri
Slide 2: Credit Suisse 19th Annual Asian Investment Conference
For personal use only Credit Suisse 19th Annual Asian Investment Conference Conrad Hotel, Hong Kong Presentation to Investors and Analysts 5-8 April 2016 Patrick Upfold Chief Financial Officer Karen Khadi Head of Investor Relations
Slide 3: Disclaimer
Disclaimer For personal use only This information has been prepared on a strictly confidential basis by Macquarie Group Limited ABN 94 122 169 279 (“Macquarie”) and may neither be reproduced in whole nor in part, nor may any of its contents be divulged, to any third party without the prior written c
Slide 4: Agenda
Agenda For personal use only 01 Overview of Macquarie 02 Macquarie’s Operating Groups 03 3Q16 Update 04 Outlook 05 Appendices PAGE 3
Slide 5: Overview of Macquarie
For personal use only 01 Overview of Macquarie
Slide 6: About Macquarie
About Macquarie For personal use only Macquarie has built a uniquely diversified business since its inception in 1969. It is a global business built upon a range of products and sectors in which it has world-leading expertise • Global provider of banking, financial, advisory, investment and funds ma
Slide 7: Why Macquarie?
Why Macquarie? For personal use only Strong earnings growth Predictable earnings 46 yrs of profitability over the last 4 years, 74% of income from Profitable every year since inception expected to continue for FY16 annuity-style businesses1 Geographically Strong shareholder Long term ratings diverse
Slide 8: Years of profitability
46 years of profitability For personal use only $Am 2.0 Hill Samuel UK 1.6 opens branch office in Sydney 1.2 Recession Currency 0.8 Crisis 0.4 - $Am 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 Hills Motorway Global real Mortgage securitisation 100 estate crash Recession 80 First listed St
Slide 9: Strong earnings growth
Strong earnings growth For personal use only FY15 EPS of $A5.02 FY15 Operating income of $A9,262m FY15 up 31% on FY14 FY15 up 14% on FY14 $A $Am 6.00 10,000 5.00 8,000 4.00 6,000 3.00 4,000 2.00 2,000 1.00 - - FY12 FY13 FY14 FY15 1H16 FY12 FY13 FY14 FY15 1H16 1H 2H PAGE 8
Slide 10: Geographic footprint
Geographic footprint For personal use only 13,791 staff in over 28 countries Europe, Middle East & Africa Asia Americas Staff: 1,376 Staff: 3,530 Staff: 2,517 Asia Europe Bangkok Manila Canada Amsterdam Beijing Mumbai USA Calgary Dublin Gurgaon Seoul Austin Nashville Montreal Frankfurt Hong Kong Sha
Slide 11: Predictable earnings and geographically diverse
Predictable earnings and geographically diverse For personal use only Annuity-style vs Capital markets facing1 Geographical split of income2 1H16 1H16 Capital markets Australia3 Americas facing 29% 31% 26% Annuity-style 74% EMEA Asia 24% 16% 1. Annuity-style based on 1H16 net profit contribution (ca
Slide 12: Business mix
Business mix For personal use only Macquarie Asset Management Corporate and Asset Finance Banking and Financial Services Commodities and Financial Markets Macquarie Capital Macquarie Securities Net profit contribution ($Ab) 4.5 4.0 3.5 1.3 3.0 2.5 3.0 2.0 1.0 1.5 2.8 1.0 1.2 0.5 1.0 - FY07 FY11 FY15
Slide 13: Stable earnings
Stable earnings For personal use only Macquarie Group 10-year earnings CAGR: 8%¹ 10 year earnings volatility2 10 year earnings volatility2 (MQG vs fund managers) (MQG vs investment banks) Brookfield AM AllianceBernstein Blackrock Schroders MGL Eaton Vance UBS Nomura DB Citi CS Jef Barc MS GS JPM MGL
Slide 14: Strong shareholder returns
Strong shareholder returns For personal use only Macquarie’s total shareholder return has consistently outperformed the ASX 200 for purchases since listing and held to date1 Quarterly purchases 2,781% Outperformance / (underperformance) vs ASX 200 500% 400% 300% 200% 100% 0% Since listing 2Q98 2Q00
Slide 15: Long term ratings stability
Long term ratings stability Macquarie Bank Limited For personal use only Standard & Poor’s Ratings Movements from 2007 AA+ Rating movement (notches) AA 2007 AA- 3 4 5 4 A+ 2 5 4 2016 0 0 5 A Intra-period A- ratings movement BBB+ Macquarie JPMorgan Credit Bank of Morgan Stanley Goldman Sachs Barclays
Slide 16: Funded balance sheet remains strong
2 Funded balance sheet remains strong For personal use only Increase in funded assets during the Dec 15 quarter largely due to the continued transitioning of AWAS and Esanda portfolios $Ab 31 March 2015 $Ab 30 September 2015 $Ab 31 December 2015 140 140 140 130 130 130 ST wholesale issued paper (11%
Slide 17: Term funding issuances
Term funding issuances For personal use only $A20.9b of term funding raised in FY16 to date1 Weighted average life of debt issued: 4.9 years Currency Tenor Type Covered Bonds 4% Other 1-2yrs SMART ABS 8% Securitisations & 12% 11% Other Other secured 11% finance PUMA RMBS EUR 21% 9% 17% USD Syndicate
Slide 18: Strong regulatory ratios
Strong regulatory ratios For personal use only Macquarie Bank Group (Dec 15) Harmonised ratios 6.1% 14.0% 6.0% 200% 11.5% 170% 5.0% 10.5% 150% 4.0% 7.0% 3.0% 100% 2.0% 3.5% 50% 1.0% - - - CET1 ratio Leverage ratio LCR 3 1 BCBS Basel III minimum Macquarie Bank Group (Harmonised) 2 1. Includes the cap
Slide 19: Basel III capital position
Basel III capital position For personal use only • APRA Basel III Group capital at Dec 15 of $A17.3b, Group surplus of $A2.8b1 • Bank Group APRA Basel III CET1 ratio: 9.9%; Tier 1 ratio: 11.0%; Leverage ratio: 5.2% • Bank Group Harmonised Basel III CET1 ratio: 11.5%; Tier 1 ratio: 12.6%; Leverage ra
Slide 20: Regulatory update
Regulatory update For personal use only Conglomerates – In Aug 14, APRA issued its final rules for Conglomerates with implementation timing yet to be announced. We continue to work through the application of the rules with APRA and our current assessment remains that Macquarie has sufficient capit
Slide 21: Long standing conservative risk management framework
Long standing conservative risk management framework For personal use only Macquarie’s risk management principles have remained largely stable over 30 years and served the Group well over the past few years The key aspects of Macquarie’s risk management approach are: Ownership of risk at Underst
Slide 22: Macquarie's Operating Groups
For personal use only 02 Macquarie’s Operating Groups
Slide 23: Macquarie overview
Macquarie overview Global provider of banking, financial advisory, For personal use only investment and funds management services Macquarie Group overview 1 Global locations Annuity-style businesses Capital markets facing businesses North America Europe Middle East Asia 17 locations 12 locations 2 l
Slide 24: Annuity-style businesses: Macquarie Asset Management
Annuity-style businesses 1. Macquarie Asset Management For personal use only Top 50 global asset manager with $A487b of assets under management Provides clients with access to a diverse range of Macquarie Infrastructure Macquarie capabilities and products, including: and Real Assets Investment Man
Slide 25: Macquarie Asset Management: growth in base fees
Macquarie Asset Management Growth in base fees For personal use only Net Profit Contribution1 ($Am) Base Fees ($Am) AUM ($Ab) 1,372 1,400 550 1,600 1,262 502 484 487 1,450 500 1,200 1,400 450 425 989 1,200 1,139 1,000 400 1,051 905 344 350 325 1,000 784 800 300 755 800 645 250 600 600 200 400 150 40
Slide 26: MIRA: income includes more than base fees
MIRA: Income includes more than base fees For personal use only $Am MIRAperformance MIRA base fees (LHS) fees and other income $Am (LHS) MIRAfees Average base (RHS) 1 fees and other income (LHS) performance % of EUM 1 2 2 1,400 Average MIRA basebase feesfees $Am(RHS) (LHS) Average performance Averag
Slide 27: Corporate and Asset Finance
Annuity-style businesses 2. Corporate and Asset Finance For personal use only $A39.7b of loans and assets under finance Delivers tailored finance and asset management solutions Lending Aircraft to clients through the cycles Portfolio $A10.1b1 Portfolio $A9.0b2 Specialists in corporate and real e
Slide 28: Corporate and Asset Finance Group
Corporate and Asset Finance Group Asset finance and lending portfolios For personal use only Net Profit Contribution1 ($Am) Lending Portfolio2 ($Ab) Asset Finance Portfolio ($Ab) 12 30 29.6 11.2 11.0 AWAS ESANDA 1,200 1,112 10.1 10 25 1,000 9.0 21.3 826 8.0 7.9 8 20 800 17.5 698 694 16.5 611 14.5 6
Slide 29: Banking and Financial Services
Annuity-style businesses 3. Banking and Financial Services For personal use only $A39.5b total BFS deposits1 1.1 million Australian clients Mortgages and Deposits Provides a diverse range of personal banking, credit cards wealth management and business banking Financial advice products and servi
Slide 30: Banking and Financial Services group
Banking and Financial Services group Growth in BFS deposits and mortgages For personal use only Net Profit Contribution1($Am) BFS Deposits2 ($Ab) Australian Mortgage Book ($Ab) 300 285 38.7 39.5 40 37.3 30 27.6 27.8 260 243 35 33.3 24.5 250 25 31.0 29.0 30 196 200 20 170 25 17.0 150 20 15 11.8 10.8
Slide 31: Macquarie Securities
Capital markets facing businesses 1. Macquarie Securities For personal use only Innovative specialists leveraging Asia-Pacific insights to the world Global institutional securities house with strong Asia-Pacific foundations covering sales, research, ECM, execution and Research Corporate Access der
Slide 32: Macquarie Securities: strong franchise
Macquarie Securities Strong franchise – ECM and Cash equities For personal use only Net Profit Contribution1 ($Am) No.1 house for IPOs in 20152 240 Total IPO deal value ($USb) 250 1.4 Macquarie has raised more IPO capital in 200 Australia during 2015 than any other bank 1.2 150 107 100 1.0 64 50 0.8
Slide 33: Macquarie Capital
Capital markets facing businesses 2. Macquarie Capital For personal use only Global corporate finance capability, including Financial Institutions M&A, debt and equity capital markets, and PRIVATE CAPITAL MARKETS MERGERS & ACQUISITIONS EQUITY CAPITAL MARKETS PRINCIPAL INVESTMENTS DEBT CAPITAL MARK
Slide 34: Macquarie Capital: geographically diversified
Macquarie Capital Geographically diversified and market leading position For personal use only Net Profit Contribution1 ($Am) Geographical split Australian M&A Completed of Income2 ($Am) Deal Value 20154 ($USb) 1H 2H 35 450 430 400 30 350 25 Australia3 300 280 Americas 33% 20 250 42% 200 15 170 150
Slide 35: Commodities and Financial Markets
Capital markets facing businesses 3. Commodities and Financial Markets For personal use only Provides clients with risk and capital solutions across physical and financial markets • Diverse platform covering more than 25 market Energy markets Metals markets segments, with more than 140 products • Ex
Slide 36: Commodities and Financial Markets: stable earnings
Commodities and Financial Markets Stable earnings through diverse platform For personal use only Net Profit Contribution1 ($Am) Net Operating Income2 900 1H 2H 835 Investment and other 800 income 726 Commodities 3% trading income 700 Risk 52% management products 600 563 27% 539 500 Fee and commissio
Slide 37: 3Q16 Update
For personal use only 03 3Q16 Update
Slide 38: 3Q16 Overview
3Q16 Overview For personal use only Satisfactory trading conditions in 3Q16 across the Group Macquarie’s annuity-style businesses’ (Macquarie Asset Management, Corporate and Asset Finance and Banking and Financial Services) combined 3Q16 net profit contribution1 up on pcp (3Q15) but down on prio
Slide 39: 3Q16 Overview: annuity-style businesses
3Q16 Overview For personal use only Annuity-style businesses Operating Group Market positions Developments since 1H16 Macquarie Asset • Top 50 global asset manager, Australia’s largest global asset manager • AUM $A487.2b at Dec 15 down 3% on Sep 15 predominately driven by unfavourable spot exchange
Slide 40: 3Q16 Overview: capital markets facing businesses
3Q16 Overview For personal use only Capital markets facing businesses Operating Group Market positions Developments since 1H16 Macquarie Securities • Maintained equal 1st overall in the 2015 Peter Lee Survey of • Market activity across Asia-Pacific was subdued during 3Q16 as macroeconomic concerns f
Slide 41: Outlook
For personal use only 04 Outlook
Slide 42: Short term outlook
Short term outlook For personal use only • Summarised below are the outlook statements for each Operating Group • FY16 results will vary with market conditions, particularly the capital markets facing businesses Net profit contribution Update to FY16 outlook compared FY08–FY15 FY08–FY15 to outlook p
Slide 43: Short term outlook
Short term outlook For personal use only • Macquarie currently expects the FY16 combined net profit contribution1 from operating groups to be up on FY15 • The FY16 tax rate is currently expected to be broadly in line with 1H16 • As previously foreshadowed, the 2H16 result is expected to be lower tha
Slide 44: Medium term
Medium term For personal use only • Macquarie remains well positioned to deliver superior performance in the medium term • Deep expertise in major markets • Build on our strength in diversity and continue to adapt our portfolio mix to changing market conditions – Annuity-style income is provided by
Slide 45: Approximate business Basel III capital and ROE
Approximate business Basel III Capital & ROE For personal use only 30 September 2015 1 APRA Basel III Capital Approx. 1H16 Return Approx. 9-Year Average 2 Operating Group @ 8.5% ($Ab) on Ordinary Equity2 Return on Ordinary Equity Annuity-style businesses 7.7 Macquarie Asset Management 1.6 Corporate
Slide 46: Medium term
Medium term For personal use only • Annuity-style business that is diversified across regions, products, asset classes and investor types • Diversification of capabilities allows for the business to be well placed to grow assets under management in different MAM market conditions • Well positioned f
Slide 47: Select slides from result announcement for half-year ended 30 September 2015
For personal use only A Select slides from result announcement for the half-year ended 30 September 2015
Slide 48: Income Statement key drivers
Income Statement key drivers For personal use only 1H16 2H15 1H15 • Foreign exchange movements impacting all income statement key drivers $Am $Am $Am – Approx. a quarter of the increase in 1H16 NPAT on 1H15 due to FX Net interest and trading income 2,273 2,176 1,643 • Net interest and trading income
Slide 49: Macquarie Asset Management result
Macquarie Asset Management For personal use only Result 1H16 2H15 1H15 • Base fees of $A784m, up 22% on 1H15; AUM up 19% $Am $Am $Am – Favourable foreign exchange and market movement impacts Base fees 784 731 641 – MIM - net inflows into higher fee earning products Performance fees 609 294 373 – MIR
Slide 50: Corporate and Asset Finance result
Corporate and Asset Finance For personal use only Result 1H16 2H15 1H15 • Net interest and trading income of $A460m, up 41% on 1H15 $Am $Am $Am – Lending book benefiting from favourable foreign exchange impact, Net interest and trading income1 460 411 326 realisations and accretion of interest on lo
Slide 51: Banking and Financial Services result
Banking and Financial Services For personal use only Result 1H16 2H15 1H15 • Net interest and trading income of $A456m, up 12% on 1H15 $Am $Am $Am – Solid growth in Australian residential mortgages, business lending Net interest and trading income1 456 419 406 and deposits Platform and other fee and
Slide 52: Macquarie Securities result
Macquarie Securities For personal use only Result 1H16 2H15 1H15 • Brokerage and commissions of $A311m, up 19% on 1H15 $Am $Am $Am – Higher brokerage and commissions in Asia and Australia partially offset by Brokerage and commissions 311 280 262 lower brokerage and commissions in North America and E
Slide 53: Macquarie Capital result
Macquarie Capital For personal use only Result 1H16 2H15 1H15 • Fee and commission income of $A501m, up 39% on 1H15 $Am $Am $Am – Increased fee income across all product classes (M&A, ECM, DCM) Fee and commission income 501 499 361 – US and Australia experienced particularly strong growth in M&A Inv
Slide 54: Commodities and Financial Markets result
Commodities and Financial Markets For personal use only Result 1H16 2H15 1H15 • Commodities income of $A583m, up 39% on 1H15 $Am $Am $Am – Risk management products - increased client activity across most of the Commodities1 583 707 418 platform as a result of price volatility and continued business
Slide 55: Provisions for impairment
Provisions for impairment For personal use only Collective allowance for credit losses Individually assessed provisions and write-offs Non-financial assets Investments (AVS and associates) $Am 300 250 200 150 100 50 - (50) 2H15 1H16 2H15 1H16 2H15 1H16 2H15 1H16 2H15 1H16 2H15 1H16 2H15 1H16 MAM CAF
Slide 56: Legislative tax disclosures by the Australian Tax Office
Legislative tax disclosures by the Australian Tax Office For personal use only • The Australian Tax Office (ATO) will be publicly disclosing specific information on the tax position of certain corporate taxpayers including Macquarie • This information will relate to Macquarie’s Australian Tax Consol
Slide 57: Balance sheet highlights
Balance sheet highlights For personal use only • Balance sheet remains solid and conservative – Term assets covered by term funding, stable deposits and equity – Minimal reliance on short term wholesale funding markets • Total customer deposits1 continuing to grow, up 7.8% to $A42.8b at Sep 15 from
Slide 58: Diversified issuance strategy
Diversified issuance strategy1 For personal use only FY16 Term funding - diversified by currency, tenor and type 2yrs Private EUR 15% OTH 2% Securitisations 12% Placements 16% PUMA RMBS • Well diversified issuance and funding sources & Other Syndicated 15% secured finance 24% Loan Facilities 10% SMA
Slide 59: Continued customer deposit growth
Continued customer deposit growth For personal use only Macquarie has been successful in pursuing its strategy of diversifying its funding sources through growing its deposit base • In excess of 1.1 million BFS clients, of which approx. 600,000 are depositors • Focus on the composition and quality o
Slide 60: Loan portfolio growth – Funded Balance Sheet
Loan portfolio1 growth – Funded Balance Sheet For personal use only Sep 15 Mar 15 Balance predominately relates to the financing of Category $Ab $Ab gold producers. Positions well secured and Predominately financing oil counterparties generally hedge their commodity producers. Positions well secured
Slide 61: Equity investments of $A5.5b
Equity investments of $A5.5b1 For personal use only Carrying value2 Carrying value2 Sep 15 Mar 15 Category $Am $Am Description MIRA-managed funds 1,653 1,479 Macquarie Infrastructure Corporation, MPF Holdings Limited, Macquarie SBI Infrastructure Fund, Macquarie Atlas Roads, Macquarie Korea Infrastr
Slide 62: Bank Group Basel III Common Equity Tier 1 Ratio
Bank Group Basel III Common Equity Tier 1 (CET1) Ratio For personal use only • APRA Basel III CET1 ratio: 9.9%1 • Harmonised Basel III CET1 ratio: 11.6%2 Bank Group Common Equity Tier 1 (CET1) Ratio: Basel III (Sep 15) 14% 12% 0.1% 0.1% 11.4% 11.6% (1.7%) 10% 9.9% 8% 6% 11.4% 11.5% Basel III minimum
Slide 63: Strong liquidity position maintained
Strong liquidity position maintained For personal use only • 170% average LCR for Sep 15 quarter, based on month-end observations – Maintained well above regulatory minimums – Includes APRA approved AUD CLF allocation of $A5b for 2015 calendar year • Reflects long-standing conservative approach to l
Slide 64: Net assets per share
Net assets per share For personal use only $A 50.00 Net tangible assets/share Net Net assets/share intangible assets/share 43.87 2.40 (1.65) 45.00 41.68 43.84 3.93 43.84 43.09 40.00 2.81 40.30 36.35 39.16 35.00 36.35 32.50 30.00 25.00 30 Sep 14 Retained earnings Movement in reserves Capital raisings
Slide 65: Capital management update
Capital management update For personal use only • On-market share purchases since 31 Mar 15 – FY15 MEREP $A383m at a weighted average price of $A80.68 • In Oct 15, the Group issued $A0.4b in equity via an Institutional Placement (Placement) to provide capital for the acquisition of the Esanda dealer
Slide 66: Glossary
For personal use only B Glossary
Slide 67: Glossary
Glossary For personal use only $A / AUD Australian Dollar BCBS Basel Committee on Banking Supervision $US / USD United States Dollar BFS Banking and Financial Services £ British Pound CAF Corporate and Asset Finance €/EUR Euro CAGR Compound Annual Growth Rate 1H15 Half-Year ended 30 September 2014 C
Slide 68: Glossary
Glossary For personal use only EMEA Europe, the Middle East and Africa LCR Liquidity Coverage Ratio EUM Equities Under Management LNG Liquefied Natural Gas EPS Earnings Per Share LP Limited Partner FUM Funds Under Management Ltd Limited FX Foreign Exchange M&A Mergers and Acquisitions FY05 Full Year
Slide 69: Glossary
Glossary For personal use only MQA Macquarie Atlas Roads TMET Telecommunications, Media, Entertainment and Technology MSG Macquarie Securities Group UK United Kingdom MSIS Macquarie Specialised Investment Solutions US United States of America Mths Months VWAP Volume weighted average price NGLs Natur
Slide 70: Credit Suisse 19th Annual Asian Investment Conference
For personal use only Credit Suisse 19th Annual Asian Investment Conference Conrad Hotel, Hong Kong Presentation to Investors and Analysts 5-8 April 2016 Patrick Upfold Chief Financial Officer Karen Khadi Head of Investor Relations
Macquarie Group — Credit Suisse 19th Annual Asian Investment Conference 2016 on 6ix