Macquarie Group, Ltd. · ASX:MQG
Macquarie — 23rd CLSA Investors' Forum 2016
72 slides from Macquarie's conference presentation, Sep 19, 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, 19 Sep
Slide 2: 23rd CLSA Investors' Forum
For personal use only 23rd CLSA Investors’ Forum Grand Hyatt, Hong Kong Presentation to Investors and Analysts 20-21 September 2016 Patrick Upfold Chief Financial Officer James Freeman 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 1Q17 Update 04 FY17 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 47 yrs earnings Predictable earnings Geographically diverse 68% of income2 of profitability growth more than 70% of income generated outside Profitable every year since over the last 5 years from annuity-style of Australia inception businesses1 Strong shar
Slide 8: Years of profitability
47 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 FY16 EPS of $A6.19 FY16 Operating income of $A10,135m FY16 up 23% on FY15 FY16 up 9% on FY15 $A $Am 8.00 12,000 7.00 10,000 6.00 8,000 5.00 4.00 6,000 3.00 4,000 2.00 2,000 1.00 - - FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16 1H 2H PAGE 8
Slide 10: Geographic footprint
Geographic footprint For personal use only 14,493 staff in 28 countries Europe, Middle East & Africa Asia Americas Staff: 1,535 Staff: 3,652 Staff: 2,661 Asia Europe Bangkok Manila Canada Amsterdam Beijing Mumbai Calgary USA Dublin Gurgaon Seoul Montreal Austin Los Angeles Frankfurt Hong Kong Shangh
Slide 11: Predictable earnings and geographically diverse
Predictable earnings and geographically diverse For personal use only Annuity-style vs Capital markets facing1 Geographical split of income2 FY16 FY16 Capital markets Australia3 Americas facing 32% 30% 29% Annuity-style 71% Asia EMEA 14% 24% 1. Annuity-style based on FY16 net profit contribution (ca
Slide 12: Annuity-style vs Capital markets facing businesses
Annuity-style vs Capital markets facing businesses For personal use only Annuity-style businesses represent more than 70% of the Groups’ performance1 Net profit contribution2 ($Am) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 (500) FY12 FY13 FY14 FY15 FY16 Annuity-style businesses: Macquari
Slide 13: Stable earnings
Stable earnings For personal use only Macquarie Group 10-year earnings CAGR: 8%¹ 10 year earnings volatility2 5 year earnings volatility2 8.0 28.0 8.0 7.0 27.0 7.0 6.0 26.0 6.0 5.0 P&L Volatility P&L Volatility 5.0 4.0 4.0 3.0 3.0 2.0 2.0 1.0 1.0 - - Global Global Global Banks Australian Macquarie A
Slide 14: Strong shareholder returns
Strong shareholder returns For personal use only Macquarie’s total shareholder return has consistently outperformed the MSCI World Capital Markets Index1 Quarterly purchases Outperformance vs MSCI World Capital Markets Index Average outperformance vs MSCI World Capital Markets Index 450% 400% 350% 3
Slide 15: Strong shareholder returns
Strong shareholder returns For personal use only MQG Total Shareholder Return 700% Outperformance vs 3,000% 2,953% Outperformance vs MSCI World Capital 600% ASX 200 2,900% Markets Index 500% 2,800% Since listing1 2,798% n/a2 400% 10 years 101% 135% 308% 300% 5 years 281% 200% 200% 107% 116% 3 years
Slide 16: Long term ratings stability
Long term ratings stability Macquarie Bank Limited For personal use only Standard & Poor’s Ratings Movements from 2007 Rating movement (notches) AA+ AA 2007 AA- 3 5 5 4 A+ 0 2 5 0 4 5 2016 A A- Intra-period BBB+ ratings BBB movement Macquarie JPMorgan Credit UBS AG Bank of Citibank Morgan Stanley Go
Slide 17: Funded balance sheet remains strong
Funded balance sheet remains strong For personal use only $Ab $Ab $Ab 140 31 March 2015 140 31 March 2016 140 30 June 2016 4 130 130 ST wholesale issued paper 130 ST wholesale issued paper (7%) (6%) 120 120 Other debt maturing in the 120 Other debt maturing in the Cash, liquids and self next 12 mths
Slide 18: Term funding issuances
Term funding issuances For personal use only $A22.5b of term funding raised in FY16 Weighted average life of debt issued: 4.7 years1 Currency Tenor Type MBL Covered Bonds 3% GBP Securitisations & Esanda Secured 9% EUR OTH Other secured Acquisition Funding 2yrs 11% 2% finance Facility 4% 18% 14% 19%
Slide 19: Strong regulatory ratios
Strong regulatory ratios For personal use only Macquarie Bank Group (Jun 16) Macquarie Bank Group (Harmonised1 ) Macquarie Bank Group (APRA) Basel III minimum 2 6.2% 14.0% 6.0% 200% 12.1% 5.0% 10.5% 150% 4.0% 5.3% 166% 10.3% 7.0% 3.0% 100% 2.0% 3.5% 50% 1.0% - - - CET1 ratio Leverage ratio LCR 3 1.
Slide 20: Strong Basel III capital position
Strong Basel III capital position For personal use only • APRA Basel III Group capital at Jun 16 of $A16.6b, Group surplus of $A3.5b1 • Bank Group APRA Basel III CET1 ratio: 10.3%; Tier 1 ratio: 11.4%; Leverage ratio: 5.3% • Bank Group Harmonised Basel III CET1 ratio: 12.1%; Tier 1 ratio: 13.2%; Lev
Slide 21: Regulatory update
Regulatory update For personal use only Basel Capital Framework ‒ The Basel Committee has recently proposed a number of changes to the calculation of risk weighted assets, most of which are under consultation. Any impact on capital1 will depend upon the final form of the proposals and local implem
Slide 22: 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 23: Macquarie's Operating Groups
For personal use only 02 Macquarie’s Operating Groups
Slide 24: 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 >70% Capital markets facing businesses <30% North America Europe Middle East Asia 18 locations 12 loc
Slide 25: Macquarie Asset Management
MAM ANNUITY-STYLE BUSINESS 37%1 Macquarie Asset Management $A497b assets under management For personal use only Top 50 global asset manager Macquarie Infrastructure Macquarie • Provides clients with access to a diverse range and Real Assets Investment Management of capabilities and products, includi
Slide 26: MAM: Growth in base fees
MAM ANNUITY-STYLE BUSINESS 37%1 Macquarie Asset Management Growth in base fees For personal use only Net Profit Contribution2 ($Am) Base Fees ($Am) AUM ($Ab) 1,800 1,800 550 1,644 497 1,569 500 484 477 1,600 1,600 1,450 1,372 450 425 1,400 1,400 1,262 400 1,200 1,200 344 1,051 350 989 1,000 1,000 90
Slide 27: MIRA: Income includes more than base fees
MAM ANNUITY-STYLE BUSINESS 37%1 MIRA: Income includes more than base fees For personal use only $Am MIRA performance fees and other income $Am (LHS) Average base fees (RHS)2 % of EUM 1,400 MIRA base fees $Am (LHS) Average performance fees (RHS) 3 2.0% MIRA EUM at period end ($Ab) Average other incom
Slide 28: Corporate and Asset Finance
ANNUITY-STYLE BUSINESS Corporate and Asset Finance $A39b asset and loan portfolio For personal use only CAF1 26% • Delivers tailored finance and asset management solutions to clients through the cycles • Global capability in corporate and real estate credit Lending Aircraft investing and lending Por
Slide 29: Asset finance and lending portfolios
ANNUITY-STYLE BUSINESS Corporate and Asset Finance Asset finance and lending portfolios For personal use only CAF1 26% Net Profit Contribution2 ($Am) Lending Portfolio3 ($Ab) Asset Finance Portfolio ($Ab) 1,200 1,130 12 11.2 35 1,112 29.9 30.4 9.5 30 1,000 10 9.0 AWAS 8.6 826 25 7.9 800 8 698 694 ES
Slide 30: Banking and Financial Services
ANNUITY-STYLE BUSINESS Banking and Financial Services 1.1 million Australian customers2 For personal use only BFS1 8% • $A41.4b total BFS deposits3 Mortgages and Deposits • Provides a diverse range of personal credit cards banking, wealth management and business Financial advice banking products and
Slide 31: Growth in BFS deposits and mortgages
ANNUITY-STYLE BUSINESS Banking and Financial Services Growth in BFS deposits and mortgages For personal use only BFS1 8% Net Profit Contribution2($Am) BFS Deposits3 ($Ab) Australian Mortgage Book ($Ab) 400 45 35 40.4 41.4 350 350 40 37.3 30 28.5 28.8 35 33.3 300 285 24.5 31.0 260 25 243 30 250 25 20
Slide 32: Macquarie Securities Group
CAPITAL MARKETS FACING BUSINESS Macquarie Securities Group Global securities house with strong Asia-Pacific foundations For personal use only MSG 1 6% • Global institutional securities house with strong Asia-Pacific Research Corporate Access foundations covering sales, research, ECM, execution and d
Slide 33: Strong franchise – ECM and Cash equities
CAPITAL MARKETS FACING BUSINESS Macquarie Securities Group Strong franchise – ECM and Cash equities For personal use only MSG 1 6% Net Profit Contribution2 ($Am) No.1 house for IPOs in FY163 Total IPO deal value ($USb) 300 268 1.4 Macquarie has raised more IPO capital in Australia during FY16 than a
Slide 34: Macquarie Capital
CAPITAL MARKETS FACING BUSINESS Macquarie Capital MacCap 1 10% Advised on 395 transactions in FY16 For personal use only • Global corporate finance capability, including Financial Institutions M&A, debt and equity capital markets, and PRIVATE CAPITAL MARKETS EQUITY CAPITAL MARKETS MERGERS & ACQUISIT
Slide 35: Geographically diversified and market leading position
CAPITAL MARKETS FACING BUSINESS Macquarie Capital MacCap 1 10% Geographically diversified and market leading position For personal use only Net Profit Contribution2 ($Am) Geographical split Australian M&A Completed of Income3 ($Am) Deal Value FY165 ($USb) 500 1H 2H 40 451 450 430 35 400 30 350 Ameri
Slide 36: Commodities and Financial Markets
CFM CAPITAL MARKETS FACING BUSINESS 13% 1 Commodities and Financial Markets Covering 25+ market segments, with 140+ products For personal use only Provides clients with risk and capital solutions across physical and financial markets • Diverse platform covering more than 25 market Energy markets Met
Slide 37: Stable earnings through diverse platform
CFM CAPITAL MARKETS FACING BUSINESS 13% 1 Commodities and Financial Markets Stable earnings through diverse platform For personal use only Net Profit Contribution2 ($Am) Net Operating Income3 900 1H 2H Investment and 835 other income 3% 750 726 Fee and Commodities commission 65% income 600 563 576 1
Slide 38: 1Q17 Update
For personal use only 03 1Q17 Update
Slide 39: 1Q17 Macquarie Update
1Q17 Macquarie Update For personal use only • Operating groups performing in line with expectations • 1Q17 operating group contribution1 down on a strong pcp and up on prior quarter 1Q17 contribution1 vs 1Q16 Continued to perform well: Annuity-style • Higher base fees in MAM. Performance fees and as
Slide 40: Annuity-Style Businesses 1Q17 Update
Annuity-Style Businesses For personal use only 1Q17 Update FY16 contribution1 Activity during the quarter • AUM of $A496.9b, up 4% on Mar 16 due to market movements and FX Macquarie • Performance fees from several funds including Macquarie Atlas Roads and Macquarie Korea Infrastructure Fund Asset •
Slide 41: Capital Markets Facing Businesses 1Q17 Update
Capital Markets Facing Businesses For personal use only 1Q17 Update FY16 contribution1 Activity during the quarter Macquarie • Lower client volumes, particularly in Asia; ECM and Derivatives trading also lower Securities 6% Group • Asian trading opportunities in pcp not repeated • Market conditions
Slide 42: FY17 Outlook
For personal use only 04 FY17 Outlook
Slide 43: Factors impacting short-term outlook
Factors impacting short-term outlook For personal use only FY17 combined net profit contribution1 from operating groups expected to be broadly in line with FY16 Annuity-style businesses Capital markets facing businesses Macquarie Asset Management Macquarie Securities Group • Historical range: $A0.3b
Slide 44: Short-term outlook
Short-term outlook For personal use only We currently expect the FY17 combined net profit contribution1 from operating groups to be broadly in line with FY16 The FY17 tax rate is currently expected to be broadly in line with FY16 Accordingly, the Group’s result for FY17 is currently expected t
Slide 45: Medium-term
Medium-term For personal use only Macquarie remains well positioned to deliver superior performance in the medium-term Deep expertise in major markets Build on our strength in diversity and continue to adapt our portfolio mix to changing market conditions ‒ Annuity-style income is provided by
Slide 46: Approximate business Basel III capital & ROE
Approximate business Basel III Capital & ROE For personal use only As at 31 Mar 16 1 APRA Basel III Capital Approx. FY16 Return Approx. 10-Year Average 2 Operating Group @ 8.5% ($Ab) on Ordinary Equity2 Return on Ordinary Equity Annuity-style businesses 8.1 Macquarie Asset Management 1.4 Corporate a
Slide 47: 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 48: Select slides from result announcement for the year ended 31 March 2016
For personal use only A Select slides from result announcement for the year ended 31 March 2016
Slide 49: Income Statement key drivers
Income Statement key drivers For personal use only 2H16 1H16 FY16 FY15 Net foreign exchange movements impacting all income statement key drivers – impact $Am $Am $Am $Am of movement in average FX estimated to be approx. 9% of FY16 NPAT1 Net interest and trading income of $A4,346m, up 14% on FY15
Slide 50: Macquarie Asset Management Result
Macquarie Asset Management For personal use only Result FY16 FY15 Base fees of $A1,569m, up 14% on FY15 $Am $Am – MIM – favourable foreign exchange and positive prior year flows, partially offset Base fees 1,569 1,372 by lower fee revenue from insurance assets Performance fees 693 667 – MIRA – fav
Slide 51: Corporate and Asset Finance Result
Corporate and Asset Finance For personal use only Result FY16 FY15 Net interest and trading income of $A848m, up 15% on FY15 $Am $Am – Lending book benefiting from foreign exchange impact and higher levels of Net interest and trading income1 848 737 interest income arising from loans purchased at
Slide 52: Banking and Financial Services Result
Banking and Financial Services For personal use only Result FY16 FY15 Net interest and trading income of $A941m, up 14% on FY15 $Am $Am – Growth in Australian residential mortgages, business lending and Net interest and trading income1 941 825 deposits volumes Platform and other fee and commission
Slide 53: Macquarie Securities Result
Macquarie Securities For personal use only Result FY16 FY15 Brokerage and commissions of $A595m, up 10% on FY15 $Am $Am – Favourable foreign exchange impact Brokerage and commissions 595 542 – Higher brokerage and commissions in Australia, Asia and EMEA offset by Net interest and trading income1 5
Slide 54: Macquarie Capital Result
Macquarie Capital For personal use only Result FY16 FY15 Fee and commission income of $A870m broadly in line with FY15 $Am $Am – Increased fee income across M&A and ECM, with Australia experiencing Fee and commission income 870 860 particularly strong growth in M&A Investment and other income 441
Slide 55: Commodities and Financial Markets Result
Commodities and Financial Markets For personal use only Result FY16 FY15 Commodities income of $A1,315m, up 17% on FY15 $Am $Am – Foreign exchange impact Commodities1 1,315 1,125 – Increased client demand for risk management product as a result of market Risk management products 819 594 volatility
Slide 56: Impairment expense
Impairment expense1 For personal use only $Am 400 Collective Loans and specific (collective loans and specific) Impairment expense (income statement) 350 Non-financial assets Equity investments (AVS and associates) 300 250 200 150 100 50 - FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16
Slide 57: Impaired portfolios
Impaired portfolios For personal use only Impaired equity and loan portfolios (balance sheet) $Am 3,500 3,000 2,500 2,000 1,500 1,000 500 - FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 MAM CAF BFS MSG MacCap CFM Corporate Total Group1 1. Total impaired assets at 31
Slide 58: 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 9.8% to $A43.6b at Mar 16 from
Slide 59: Diversified issuance strategy
Diversified issuance strategy1 For personal use only FY16 Term funding – diversified by currency, tenor and type GBP 9% CHF Securitisations & Other secured 2yrs Private Placements PUMA RMBS SMART ABS 7% • Well diversified issuance and 1% 18% 14% 6% EUR 11% JPY 0% finance 14% Syndicated Loan AWAS Acq
Slide 60: 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
Slide 61: Resources and commodities – loans
Resources and commodities – loans For personal use only $Am CFM Impaired Loans2 Well-collateralised and Balance predominately short-dated inventory relates to the financing of 1,200 financing positions for gold producers. Positions consumers. Commodities well secured and 1,000 include power, agricul
Slide 62: CAF Lending Portfolio
CAF Lending Portfolio – $A9.5b1 For personal use only Sector exposure Facility type Corporate Purchased • While mostly sub investment grade, CAF Lending’s portfolio (63%) defaulted loans portfolio is predominately loans which are: Other Junior 12% 4% ‒ Senior Consumer 1% Aerospace/ 3% airports ‒ Sec
Slide 63: Equity investments of $A5.2b
Equity investments of $A5.2b1 For personal use only Carrying value2 Carrying value2 Mar 16 Mar 15 Category $Am $Am Description Macquarie Asset Management (MIRA) 1,611 1,505 Includes Macquarie Infrastructure Company, Macquarie SBI Infrastructure Fund, Macquarie Atlas managed funds Roads, MPF Holdings
Slide 64: Bank Group Basel III Common Equity Tier (CET1) Ratio
Bank Group Basel III Common Equity Tier 1 (CET1) Ratio For personal use only • APRA Basel III CET1 ratio: 10.7%1 • Harmonised Basel III CET1 ratio: 12.5%2 Bank Group Common Equity Tier 1 (CET1) Ratio: Basel III (Mar 16) 14% 12% 0.5% 0.6% 12.5% (1.8%) 11.6% (1.0%) 0.8% 10% 10.7% 8% 6% 12.0% CCB (2.5%
Slide 65: Strong liquidity position maintained
Strong liquidity position maintained For personal use only • 173% average LCR for Mar 16 quarter1, based on month-end observations – Maintained well above regulatory minimums – Includes APRA approved AUD CLF allocation of $A4.6b for 2016 calendar year • Reflects long-standing conservative approach t
Slide 66: Net assets per share
Net assets per share For personal use only $A 50.00 Net tangible assets/share Net assets/share 1.42 (0.36) (0.89) 45.00 2.55 44.40 41.68 40.00 41.23 38.19 35.00 30.00 25.00 31 Mar 15 Retained earnings Capital raisings and other Movement in reserves Increase in number of 31 Mar 16 (P&L less dividend)
Slide 67: Capital management update
Capital management update For personal use only The Board has resolved: ‒ To purchase shares1,2 to satisfy the MEREP requirements of approx. $A440m, subject to the New Arrangements noted below. The buying period for the MEREP will commence on 17 May 2016 and is expected to be completed by 8 July 2
Slide 68: Glossary
For personal use only B Glossary
Slide 69: Glossary
Glossary For personal use only $A / AUD Australian Dollar Avg Average $US / USD United States Dollar AVS Available for Sale £ / GBP British Pound BCBS Basel Committee on Banking Supervision € / EUR Euro BFS Banking and Financial Services 1H Half-Year ended 30 September CAF Corporate and Asset Financ
Slide 70: Glossary
Glossary For personal use only EMEA Europe, the Middle East and Africa FY17 Full Year ended 31 March 2017 EPS Earnings Per Share GFC Global Financial Crisis EUM Equities Under Management HQLA Highly Quality Liquid Assets FI&C Fixed Income & Commodities IPO Initial Public Offering FINRA Financial Ind
Slide 71: Glossary
Glossary For personal use only MEIF1 Macquarie European Infrastructure Fund 1 P&L Profit and Loss Statement MEREP Macquarie Group Employee Retained Equity Plan PCP Prior Corresponding Period PPE Property, Plant and Equipment MGL / MQG Macquarie Group Limited RBA Reserve Bank of Australia MGPA Macqua
Slide 72: 23rd CLSA Investors' Forum
For personal use only 23rd CLSA Investors’ Forum Grand Hyatt, Hong Kong Presentation to Investors and Analysts 20-21 September 2016 Patrick Upfold Chief Financial Officer James Freeman Investor Relations