Macquarie Group, Ltd. · ASX:MQG
Macquarie — H1 2013 Earnings Presentation
67 slides from Macquarie's earnings presentation, Oct 26, 2012
Slide 1: Result Announcement for the half year ended 30 September 2012
Macquarie Group Limited For personal use only Result Announcement for the half year ended 30 September 2012 Presentation to Investors and Analysts 26 October 2012 Nicholas Moore, Managing Director and Chief Executive Officer Patrick Upfold, Chief Financial Officer
Slide 2: Disclaimer
Disclaimer For personal use only The material in this presentation has been prepared by Macquarie Group Limited ABN 94 122 169 279 (Macquarie) and is general background information about Macquarie’s activities current as at the date of this presentation. This information is given in summary form and
Slide 3: Agenda
Agenda For personal use only 1. Introduction – Stuart Green 2. Overview of Result – Nicholas Moore 3. Result Analysis and Financial Management – Patrick Upfold 4. Outlook – Nicholas Moore 5. Appendices 3
Slide 4: Introduction
For personal use only 1 Introduction Stuart Green Investor Relations Macquarie Group Limited Result Announcement for the half year ended 30 September 2012 26 October 2012 – Presentation to Investors and Analysts 4
Slide 5: Overview of Result
For personal use only 2 Overview of Result Nicholas Moore Managing Director and Chief Executive Officer Macquarie Group Limited Result Announcement for the half year ended 30 September 2012 26 October 2012 – Presentation to Investors and Analysts 5
Slide 6: About Macquarie
About Macquarie Building for the medium term For personal use only Top 50 global asset manager with $A336.8b1 of assets under management Macquarie Provides clients with access to a diverse range of capabilities and products, including infrastructure and real asset management, securities Funds in
Slide 7: 1H13 result
1H13 result For personal use only Net profit of $A361m, up 18% on 1H12 and down 15% on 2H12 Operating income $A3.1b, down 5% on 1H12 and down 17% on 2H12 Macquarie’s annuity-style businesses, Macquarie Funds Group, Corporate and Asset Finance, Banking and Financial Services, continued to perfo
Slide 8: 1H13 result
1H13 result For personal use only Sep 12 v Sep 12 Mar 12 Sep 11 Sep 11 $Am $Am $Am Net operating income 5% 3,081 3,720 3,243 Total operating expenses 9% (2,564) (3,086) (2,828) Operating profit before income tax 25% 517 634 415 Income tax expense 46% (156) (180) (107) Profit attributable to
Slide 9: Financial performance
Financial performance For personal use only $Am 1H13 Operating income of $A3,081m $Am 1H13 Profit of $A361m 1H13 down 5% on 1H12 800 1H13 up 18% on 1H12 4,000 400 2,000 0 0 2H10 1H11 2H11 1H12 2H12 1H13 2H10 1H11 2H11 1H12 2H12 1H13 $A 1H13 EPS of $A1.06 $A 1H13 DPS of $A0.75 2.00 1H13 up 22% on 1H1
Slide 10: Assets under management of $A341b
Assets under management of $A341b For personal use only AUM increased $A13.6b or 4% since 31 Mar 12, primarily driven by positive market and valuation movements and investments in the infrastructure and real assets business $Ab 10
Slide 11: Diversified income
Diversified income Operating income1 by source For personal use only Operating income before impairments charges on equity investments and non-financial assets 12 months to 31 Mar 12 6 months to 30 Sep 12 $A7.2b $A3.3b Institutional and retail cash equities Equity 14% 11% 2% 11% derivatives 23% 25%
Slide 12: Diversified by region
Diversified by region International income1 61% of total Total staff 13,463; International staff 54% of total For personal use only EUROPE, MIDDLE EAST ASIA AMERICAS & AFRICA2 Income: $A625m (19% of total) Income: $A353m (11% of total) Income: $A1,006m (31% of total) Staff: 1,229 Staff: 2,813 Staff:
Slide 13: Diversified income by region
Diversified income Operating income1 by region For personal use only 61% of operating income1 in 1H13 is generated offshore FX translation estimated to have a minimal impact on the 1H13 result compared to both 1H12 and 2H12 $Am 1,600 1H11 1,400 2H11 1,200 1H12 1,000 2H12 1H13 800 600 400 200 0 A
Slide 14: Macquarie Funds
Macquarie Funds Operating income of $A725m, down 7% on 1H12 and up 16% on 2H12 Net profit contribution of $A356m, down 11% on 1H12 and up 46% on 2H12 For personal use only AUM of $A337b up 4% on 1H12 and up 4% on 2H12 Macquarie Infrastructure and Real Assets Macquarie Investment Management Macquarie
Slide 15: Corporate and Asset Finance
Corporate and Asset Finance Operating income of $A507m, down 4% on 1H12 and down 8% on 2H12 Net profit contribution of $A335m, down 6% on 1H12 and down 1% on 2H12 For personal use only Asset and loan portfolio of $A21.4b at 1H13, up 4% on 1H12 and up 4% on 2H12 Corporate Lending $A8.1b in line with
Slide 16: Banking and Financial Services
Banking and Financial Services Operating income of $A716m, up 2% on 1H12 and up 7% on 2H12 Net profit contribution of $A185m, up 28% on 1H12 and up 42% on 2H12 For personal use only Global client numbers 1.13 million; Australian clients numbers approx. 1 million Private Wealth/Direct Intermediary Re
Slide 17: Macquarie Securities
Macquarie Securities Operating income of $A347m, down 36% on 1H12 and down 1% on 2H12 Net loss of $A64m down from a loss of $ A19m in 1H12 and up from a loss of $A175m in 2H12 For personal use only Cash business delivered a break even result. 1H13 loss includes run-off costs from legacy activities M
Slide 18: Macquarie Capital
Macquarie Capital Operating income of $A229m, down 15% on 1H12 and down 41% on 2H12 Net profit contribution of $A10m For personal use only 205 transactions valued at $A36b during the first half of the year (214 transactions valued at $A41b in 1H12 and 221 transactions valued at $A55b in 2H12) Market
Slide 19: Fixed Income, Currencies and Commodities
Fixed Income, Currencies and Commodities Operating income of $A590m, up 42% on 1H12 and down 38% on 2H12 Net profit contribution of $A219m, up from $A6m profit in 1H12 and down 59% on 2H12 For personal use only Commodity Markets (Physical & Financial) Financial Markets (Primary & Secondary) 12% of o
Slide 20: Cost Performance
Cost Performance For personal use only 1H13 operating expenses (excluding brokerage and commissions expense) $A2.2b; down $A0.2b on 1H12 Achieved by ongoing cost reduction initiatives including centralisation of support functions and continued focus on costs Select investment in growth areas i
Slide 21: Strong funding and balance sheet position
Strong funding and balance sheet position For personal use only Diverse and stable funding base, minimal reliance on short term wholesale funding markets Total deposits1 increased to $A36.2b at Sep 12 from $A33.9b at Mar 12 Represents 41% of the Group’s total funding sources Group loan asset
Slide 22: Funded balance sheet remains strong
Funded balance sheet remains strong For personal use only Macquarie Group Limited $Ab $Ab $Ab 100 30 September 2011 100 31 March 2012 100 30 September 2012 90 ST wholesale 90 90 issued paper (6%) ST wholesale ST wholesale issued paper (6%) Other debt1 maturing in issued paper (7%) Other debt1 maturi
Slide 23: Stable Basel III capital position
Stable Basel III capital position For personal use only Harmonised Basel III Group capital of $A12.6b, Group surplus of $A3.4b at Sep 121 $Ab Group regulatory surplus: Basel III (Sep 12) 5.0 4.5 0.2 (0.5) 0.2 4.0 4.4 4.3 3.5 (1.3) 3.0 2.5 3.0 Based on 8.5% 2.0 (minimum Tier 1 3.9 3.9 4.2 3.5 ratio
Slide 24: Capital Management Strategy update
Capital Management Strategy update For personal use only On market purchases since 31 Mar 12 FY12 MEREP $A242m at a weighted average price of $A26.97 2H12 DRP $A31m at a weighted average price of $A26.04 Buyback $A251m at a weighted average price of $A25.58 Of the $A500m buyback previously
Slide 25: Interim Dividends
Interim Dividends For personal use only 1H13 dividend set at $A0.75, 70% payout ratio 1H13 dividend up on 1H12 dividend of $A0.65 and in line with 2H12 dividend of $A0.75 Dividend remains unfranked Dividend Reinvestment Plan shares for the 1H13 dividend to be sourced on market 25
Slide 26: Result Analysis and Financial Management
For personal use only 3 Result Analysis and Financial Management Patrick Upfold Chief Financial Officer Macquarie Group Limited Result Announcement for the half year ended 30 September 2012 26 October 2012 – Presentation to Investors and Analysts 26
Slide 27: Income Statement key drivers
Income Statement key drivers For personal use only Sep 12 Mar 12 Sep 11 Net interest income down 8% on 1H12 to $A644m $Am $Am $Am – Reduced levels of early repayments in Corporate Lending portfolio – Reduced income from provision of financing facilities to external funds and Net interest income 64
Slide 28: Macquarie Funds Result
Macquarie Funds Result For personal use only Sep 12 Mar 12 Sep 11 Base fees up 8% on 1H12 $Am $Am $Am – Higher AUM primarily due to market and valuation movements – Higher fees from the full ownership of Macquarie Korea Infrastructure Base fees 480 459 446 Fund’s manager Performance fees 76 36 89
Slide 29: Corporate and Asset Finance Result
Corporate and Asset Finance Result For personal use only Sep 12 Mar 12 Sep 11 Net interest and trading income down 14% on 1H12 $Am $Am $Am – Loan portfolio broadly flat; lower levels of early loan repayments experienced Net interest and trading income1 251 293 293 – Increased funding costs due to
Slide 30: Banking and Financial Services Result
Banking and Financial Services Result For personal use only Sep 12 Mar 12 Sep 11 Net interest and trading income up 4% on 1H12 $Am $Am $Am – Larger retail deposit base Net interest and trading income1 372 346 357 – Partially offset by lower loan portfolio due to the sale of the Canadian Premium Fu
Slide 31: Macquarie Securities Result
Macquarie Securities Result For personal use only Sep 12 Mar 12 Sep 11 Cash equities business break even overall $Am $Am $Am – Subdued market conditions, partially offset by maintenance/improvement in client rankings, resulting in brokerage and commission income being Brokerage and commissions 216
Slide 32: Macquarie Capital Result
Macquarie Capital Result For personal use only Sep 12 Mar 12 Sep 11 Fee and commission income down 7% on 1H12 $Am $Am $Am – Continued subdued market conditions leading to lower capital markets related income Fee and commission income 272 281 292 – Advisory and capital markets activity: 205 transac
Slide 33: Fixed Income, Currencies and Commodities Result
Fixed Income, Currencies and Commodities Result For personal use only Sep 12 Mar 12 Sep 11 Commodities trading income up 21% on 1H12 $Am $Am $Am – Energy markets experienced strong customer flow across the global platform, particularly in US power and oil businesses Commodities1 338 297 279 – Agri
Slide 34: 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 Retail deposits1 continuing to grow, up 6% to $A30.8b at Sep 12 from $A29.0b at
Slide 35: Well diversified funding sources
Well diversified funding sources For personal use only Diversity of MGL funding sources MGL term funding (drawn and undrawn1) Wholesale maturing beyond one year (including equity issued paper Deposits - Equity & hybrids corporate & and hybrids) wholesale Loan capital $Ab Equity & hybrids Loan capita
Slide 36: Continued retail deposit growth
Continued retail 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 million retail clients, of which more than 641,000 are depositors Focus on the composition and qualit
Slide 37: Loan portfolio growth
Loan portfolio1 growth For personal use only Volume Total Income $Ab Peak in 1H12 due to early loan $Am 45 repayments in Corporate Lending 900 portfolio and higher income from financing facilities to external funds 40 800 35 700 30 600 25 500 20 400 15 300 10 200 5 100 0 0 Sep 09 Mar 10 Sep 10 Mar 1
Slide 38: Equity investments of $A5.0b
Equity investments of $A5.0b1 For personal use only Carrying Carrying value2 value2 Sep 12 Mar 12 Category $Am $Am Description Macquarie Funds (MIRA) managed 942 869 Macquarie Atlas Roads, Macquarie SBI Infrastructure Company, Macquarie Infrastructure funds Company, Macquarie International Infrastru
Slide 39: Group Capital Surplus and Bank Group's CET1 ratio in excess of minimum
Group Capital Surplus and Bank Group’s CET1 ratio in excess of minimum For personal use only Based on the Macquarie Group Basel III capital position as at 30 Sep 12 and on a Harmonised Basel III basis1: Group capital surplus is $A3.4b measured at 8.5%2 (BIS requirement in 2019) MBL’s CET1 rati
Slide 40: Bank Group Basel III Common Equity Tier 1 (CET1) Ratio
Bank Group Basel III Common Equity Tier 1 (CET1) Ratio For personal use only Strong Bank Group Harmonised Basel III CET1 ratio - Common Equity Tier 1: 11.8%; Tier 1: 12.8% Basel III applies only to the Bank Group and not the Non-Bank Group Bank Group Common Equity Tier 1 (CET1) Ratio: Basel III
Slide 41: Macquarie Bank capital position relative to global peers
Macquarie Bank capital position relative to global peers For personal use only MBL Harmonised Basel III CET1 ratio is well above minimum CET1 + CCB and highest among peers MBL’s CET1 ratio of 11.8% compares favourably to the current estimated global average of 7.1% reported by BIS in a survey of
Slide 42: Outlook
For personal use only 4 Outlook Nicholas Moore Managing Director and Chief Executive Officer Macquarie Group Limited Result Announcement for the half year ended 30 September 2012 26 October 2012 – Presentation to Investors and Analysts 42
Slide 43: Short term outlook
Short term outlook For personal use only Summarised below are the outlook statements for each Operating Group FY13 results will vary with market conditions, particularly the capital markets facing businesses which continue to experience subdued market conditions Net profit contribution FY07- FY1
Slide 44: Short term outlook
Short term outlook For personal use only Consistent with our statement at the FY12 result announcement on 27 Apr 12 and reconfirmed at our AGM on 25 Jul 12, we continue to expect an improved result for FY13 on FY12 provided market conditions for FY13 are not worse than FY12 The FY13 result also
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 th
Slide 46: Approximate business Basel III & ROE
Approximate business Basel III & ROE For personal use only APRA Basel III Capital Approx. 1H13 Return Operating Group @ 8.5% ($Ab) on Ordinary Equity1 Annuity-style businesses (excluding legacy) Approx. 6-Year Average Return on Ordinary Equity1 Macquarie Funds Group 1.6 Corporate and Asset Finance 2
Slide 47: Medium term
Medium term For personal use only Annuity-style business that is diversified across regions, products, asset classes and investor types MFG Well positioned for organic growth with several strongly performing products and an efficient operating platform Any improvement in market confidence shou
Slide 48: Appendix: Additional Information – Funding
For personal use only A Macquarie Group Limited Appendix Additional Information – Funding Result Announcement for the half year ended 30 September 2012 26 October 2012 – Presentation to Investors and Analysts 48
Slide 49: Group funding structure
Group funding structure For personal use only MGL and MBL are the Group’s two primary external funding vehicles which have separate and distinct funding, capital and liquidity management arrangements MBL provides funding to the Bank Group MGL provides funding predominantly to the Non-Bank Grou
Slide 50: Funded balance sheet reconciliation
Funded balance sheet reconciliation For personal use only The Group’s statutory balance sheet is prepared based on generally accepted accounting principles which do not represent actual funding requirements A funded balance sheet reconciliation has been prepared to reconcile the reported assets
Slide 51: Funding for the Group September 2012
Funding for the Group 30 September 2012 For personal use only Sep 12 Mar 12 Sep 11 Well diversified funding sources $Ab $Ab $Ab Funding sources Minimal reliance on short term wholesale funding markets Negotiable certificates of deposits 1.3 1.7 1.5 Commercial paper 4.4 4.6 4.2 Deposit base rep
Slide 52: Funding for the Bank Group September 2012
Funding for the Bank Group 30 September 2012 For personal use only Sep 12 Mar 12 Sep 11 Bank balance sheet remains very liquid, well capitalised $Ab $Ab $Ab Funding sources and with a diversity of funding sources Negotiable certificates of deposits 1.3 1.7 1.5 Term funding beyond one year (exclu
Slide 53: Funding for the Non-Bank Group September 2012
Funding for the Non-Bank Group 30 September 2012 For personal use only Sep 12 Mar 12 Sep 11 Non-Bank Group is predominantly term funded $Ab $Ab $Ab Funding sources Term funding beyond one year (excluding equity) has a Structured notes 0.8 0.6 0.6 weighted average term to maturity of 4.8 years 0.
Slide 54: Explanation of Funded Balance Sheet reconciling items
Explanation of Funded Balance Sheet reconciling items For personal use only Self funded trading assets: There are a number of entries on the balance sheet that arise from the normal course of trading activity we conduct with our clients and counterparties. They typically represent both sides of a
Slide 55: Conservative long standing liquidity risk management framework
Conservative long standing liquidity risk management framework For personal use only Liquidity Policy The key requirement of MGL and MBL’s liquidity policies is that the entities are able to meet all liquidity obligations on a daily basis and during a period of liquidity stress: a minimum twelve
Slide 56: Appendix: Additional Information – Capital
For personal use only B Macquarie Group Limited Appendix Additional Information – Capital Result Announcement for the half year ended 30 September 2012 26 October 2012 – Presentation to Investors and Analysts 56
Slide 57: Macquarie Group Basel III regulatory capital
Macquarie Group Basel III regulatory capital Surplus calculation For personal use only Harmonised APRA Basel III Basel III 30 September 2012 $Am $Am Macquarie Group eligible capital: Bank Group Gross Tier 1 capital 9,010 9,010 Non-Bank Group eligible capital 3,594 3,594 Eligible capital 12,604 12,60
Slide 58: Macquarie Group Harmonised Basel III regulatory capital
Macquarie Group Harmonised Basel III regulatory capital Bank Group contribution For personal use only Strong Harmonised Basel III Bank Group capital ratios - Tier 1: 12.8% (CET 1: 11.8%) Risk-weighted Capital assets Tier 1 Deductions Requirement1 30 September 2012 $Am $Am $Am Credit risk On balanc
Slide 59: Macquarie Group regulatory capital: Non-Bank Group contribution
Macquarie Group regulatory capital Non-Bank Group contribution For personal use only APRA has specified a regulatory capital framework for MGL A dollar capital surplus is produced; no capital ratio calculation is specified APRA has approved Macquarie’s Economic Capital Adequacy Model (ECAM) fo
Slide 60: Macquarie Group regulatory capital: Non-Banking Group contribution
Macquarie Group regulatory capital Non-Banking Group contribution For personal use only Capital Assets Requirement Equivalent Risk 30 September 2012 $Ab $Am Weight Funded assets Cash and liquid assets 1.8 17 12% Loan assets1 1.3 120 113% Assets held for sale2 - Debt investment securities 0.2 4 32% C
Slide 61: Macquarie Group Basel II regulatory capital
Macquarie Group Basel II regulatory capital1 Surplus calculation For personal use only 30 Sep 12 Basel II $Am Macquarie Group eligible capital: Bank Group eligible capital 8,722 Non-Bank Group eligible capital 3,650 Eligible capital 12,372 (a) Macquarie Group capital requirement: Bank Group contribu
Slide 62: Macquarie Group Basel II regulatory capital
Macquarie Group Basel II regulatory capital1 Bank Group contribution For personal use only Strong Bank Group capital ratios - Tier 1: 13.3% (Core Tier 12: 12.0%); Total Capital: 15.6% Risk-weighted Capital assets Tier 1 Deductions Requirement3 30 September 2012 $Am $Am $Am Credit risk On balance s
Slide 63: Appendix: Glossary
For personal use only C Macquarie Group Limited Appendix Glossary Result Announcement for the half year ended 30 September 2012 26 October 2012 – Presentation to Investors and Analysts 63
Slide 64: Glossary
Glossary For personal use only $A Australian Dollar AUM Assets Under Management $C Canadian Dollar AVS Available for Sale $US United States Dollar BIS Bank for International Settlements € Euro BFS Banking and Financial Services CAF Corporate and Asset Finance 1H12 Half Year ended 30 September 2011 C
Slide 65: Glossary
Glossary For personal use only DPS Dividend Per Share FY12 Full Year ended 31 March 2012 DRP Dividend Reinvestment Plan FY13 Full Year ended 31 March 2013 ECAM Economic Capital Adequacy Model G10 Group of Ten Industrialised Nations ECM Equity Capital Markets GDR Global Depository Receipt HK Hong Kon
Slide 66: Glossary
Glossary For personal use only MBL Macquarie Bank Limited NZ New Zealand MEAP Macquarie Essential Assets Partnership Operating Revenues less those expenses directly attributable to the Income revenues MEC Metals and Energy Capital P&L Profit and Loss MEIF Macquarie European Infrastructure Fund PPE P
Slide 67: Macquarie Group Limited
Macquarie Group Limited For personal use only Result Announcement for the half year ended 30 September 2012 Presentation to Investors and Analysts 26 October 2012 Nicholas Moore, Managing Director and Chief Executive Officer Patrick Upfold, Chief Financial Officer