Slide 1: Presentation to investors and analysts: FY16 result announcement
For personal use only Presentation to investors and analysts Result announcement for the full year ended 31 March 2016 6 May 2016
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 – Karen Khadi 2 Overview of Result – Nicholas Moore 3 Result Analysis and Financial Management – Patrick Upfold 4 Outlook – Nicholas Moore 5 Appendices PAGE 3
Slide 4: Introduction
For personal use only 1 Introduction Karen Khadi – Head of Investor Relations
Slide 5: Overview of Result
For personal use only 2 Overview of Result Nicholas Moore – Managing Director and Chief Executive Officer
Slide 6: About Macquarie
About Macquarie For personal use only Building for the long-term Macquarie Asset • Top 50 global asset manager with $A476.9b1 of assets under management Management • Provides clients with access to a diverse range of capabilities and products, including infrastructure and real asset management, secu
Slide 7: 2H16 Result
2H16 Result For personal use only $A993m Net profit $A993m, up 7% on 2H15 albeit down 7% on a strong 1H16 result Operating income $A4,817m, broadly in line with 2H15 and down 9% on 1H16 As foreshadowed: ‒ Macquarie’s annuity-style businesses (Macquarie Asset Management, Corporate and Asset Fin
Slide 8: FY16 Result
FY16 Result For personal use only $A2,063m Net profit $A2,063m, up 29% on FY15 Operating income $A10,135m, up 9% on FY15 As foreshadowed: ‒ Macquarie’s annuity-style businesses (Macquarie Asset Management, Corporate and Asset Finance, and Banking and Financial Services) FY16 combined net profi
Slide 9: FY16 Result
FY16 Result For personal use only 2H16 1H16 FY16 FY15 FY16 v $Am $Am $Am $Am FY15 Net operating income 4,817 5,318 10,135 9,262 9% Total operating expenses (3,421) (3,699) (7,120) (6,740) 6% Operating profit before income tax 1,396 1,619 3,015 2,522 20% Income tax expense (397) (530) (927) (899) 3%
Slide 10: Financial performance
Financial performance For personal use only FY16 Operating income of $A10,135m FY16 Profit of $A2,063m FY16 up 9% on FY15 FY16 up 29% on FY15 $Am $Am 12,000 2,400 2,000 1,600 8,000 1,200 800 400 4,000 - FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16 FY16 EPS of $A6.19 FY16 DPS of $A4.00 FY16 up 2
Slide 11: Annuity-style vs Capital markets facing businesses
Annuity-style vs Capital markets facing businesses For personal use only Annuity-style businesses represent more than 70% of the Groups’ performance1 Net profit contribution2 ($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 12: Assets under management of $A478.6 billion
Assets under management of $A478.6 billion1 For personal use only AUM decreased 2% since 31 Mar 15, due to a decrease in insurance assets and asset realisations, partially offset by higher asset valuations, additional investments and positive flows $Ab 500 400 300 200 100 - Mar 12 Mar 13 Mar 14 Mar
Slide 13: Diversification by region
Diversification by region International income 68% of total income1 For personal use only Total staff 14,372; International staff 54% of total Europe, Middle East & Africa Asia Americas Income: $A2,376m (24% of total) Income: $A1,432m (14% of total) Income: $A2,926m (30% of total) Staff: 1,508 Staff
Slide 14: Diversification by region
Diversification by region For personal use only 68% of income1 in FY16 was generated offshore A 10% movement2 in AUD is estimated to have approx. 7% impact on full year NPAT ‒ The impact of the movement in average FX rates is estimated to be approx. 9% of FY16 NPAT3 $Am 3,500 3,000 2,500 2,000 1
Slide 15: Macquarie Asset Management
Macquarie Asset Management Operating income of $A2,710m, up 12% on prior year For personal use only Net profit contribution of $A1,644m, up 13% on prior year AUM of $A476.9b1 broadly in line with prior year Macquarie Infrastructure and Real Assets Macquarie Investment Management Macquarie Specialise
Slide 16: Corporate and Asset Finance
Corporate and Asset Finance Operating income of $A1,723m, up 8% on prior year1 For personal use only Net profit contribution of $A1,130m, up 2% on prior year1 Asset Finance and Lending portfolio of $A39.4b up 37% on prior year Lending Asset Finance • Lending’s funded loan portfolio of $A9.5b2, down
Slide 17: Update on CAF Acquisitions
Update on CAF Acquisitions AWAS and Esanda For personal use only Both portfolios successfully integrated and performing in line with expectations AWAS ESANDA In Mar 15, Macquarie agreed to purchase up to 90 aircraft In Oct 15, Macquarie announced the acquisition of from AWAS for $US4.0b the Esan
Slide 18: Banking and Financial Services
Banking and Financial Services Operating income of $A1,464m, up 9% on prior year For personal use only Net profit contribution of $A350m, up 23% on prior year Australian client numbers 1.1 million Personal Banking Wealth Management Business Banking Provides retail financial products such as mortga
Slide 19: Macquarie Securities
Macquarie Securities Operating income of $A1,220m, up 33% on prior year For personal use only Net profit contribution of $A268m, up from $A64m in the prior year Cash Derivatives and Trading Increased client activity across the Asia-Pacific region in 1H16 driven by 1H16 benefited from increased c
Slide 20: Macquarie Capital
Macquarie Capital Operating income of $A1,155m, up 10% on prior year For personal use only Net profit contribution of $A451m, up 5% on prior year 395 transactions valued at $A176b in FY16 (480 transactions valued at $A143b in FY15) Market Conditions1 Australia and New Zealand Asia Americas EMEA ANZ
Slide 21: Commodities and Financial Markets
Commodities and Financial Markets Operating income of $A1,695m, down 7% on prior year For personal use only Net profit contribution of $A576m, down 31% on prior year Commodity Markets (Physical & Financial) Financial Markets (Primary & Secondary) 65% of operating income1 23% of operating income1 12%
Slide 22: Strong funding and balance sheet position
Strong funding and balance sheet position For personal use only Macquarie remains well funded with a solid and conservative balance sheet, while pursuing its strategy of diversifying funding sources by continuing to grow its deposit base and accessing a variety of funding markets Total customer
Slide 23: Funded balance sheet remains strong
Funded balance sheet remains strong For personal use only $Ab 31 March 2015 $Ab 30 September 2015 $Ab 31 March 2016 140 4 140 140 130 130 130 ST wholesale issued paper (7%) 120 120 ST wholesale issued paper 120 Other debt maturing in the next (9%) Cash, liquids and self securitised 12 mths 1 (9%) 11
Slide 24: Basel III capital position
Basel III capital position For personal use only • APRA Basel III Group capital at Mar 16 of $A17.2b, Group surplus of $A3.9b1 • Bank Group APRA Basel III CET1 ratio: 10.7%; Tier 1 ratio: 11.8%; Leverage ratio: 5.5% • Bank Group Harmonised2 Basel III CET1 ratio: 12.5%; Tier 1 ratio: 13.6%; Leverage
Slide 25: Strong regulatory ratios
Strong regulatory ratios For personal use only Macquarie Bank Group (Mar 16) Harmonised ratios 6.4% 14.0% 6.0% 200% 12.5% 173% 5.0% 10.5% 150% 4.0% 7.0% 3.0% 100% 2.0% 3.5% 50% 1.0% - - - CET1 ratio Leverage ratio LCR3 1 BCBS Basel III minimum Macquarie Bank Group (Harmonised)2 1. Includes the capit
Slide 26: Final dividend
Final dividend For personal use only FY16 ordinary dividend set at $A4.00, 66% payout ratio, up on FY15 ordinary dividend of $A3.30 − 2H16 ordinary dividend $A2.40 (40% franked) up on 1H16 ordinary dividend of $A1.60 (40% franked) − Record date for 2H16 ordinary dividend is 18 May 16 and payment d
Slide 27: Result Analysis and Financial Management
For personal use only 3 Result Analysis and Financial Management Patrick Upfold – Chief Financial Officer
Slide 28: 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 29: 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 30: 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 31: 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 32: 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 33: 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 34: 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 35: 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 36: Impaired portfolios
Impaired portfolios For personal use only $Am Impaired equity and loan portfolios (balance sheet) 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. As at 31 Mar 16, total Grou
Slide 37: Costs of compliance
Costs of compliance For personal use only The industry is seeing a continuing increase in regulatory initiatives, resulting in increased compliance requirements across all levels of the organisation Macquarie is regulated by approx. 209 authorities in 28 jurisdictions Direct cost of compliance
Slide 38: 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 39: Diversified issuance strategy
Diversified issuance strategy1 For personal use only FY16 Term funding – diversified by currency, tenor and type Well diversified issuance and GBP Private PUMA SMART ABS 9% Placements RMBS 7% Securitisations & 2yrs EUR 14% 6% CHF Other secured 18% 11% 1% OTH finance 14% Syndicated Loan Facilities
Slide 40: 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 41: Loan portfolio growth – Funded Balance Sheet
Loan portfolio1 growth – Funded Balance Sheet For personal use only Operating Category Mar 16 Mar 15 Description Group $Ab $Ab Asset Finance2 23.3 11.2 Finance lease assets 12.7 4.9 Secured by underlying financed assets CAF Operating lease assets 10.6 6.3 Diversified corporate and real estate lendin
Slide 42: 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 43: 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 portfolio is predominately loans which are: loans Other Junior 12% 4% ‒ Senior Consumer 1% Aerospace/ 3% airports ‒ Sec
Slide 44: 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 45: Regulatory update
Regulatory update For personal use only Conglomerates ‒ APRA announced on 29 Mar 16 that it has deferred finalising the capital components of the Level 3 framework for Conglomerates. APRA will consult on any new Level 3 capital requirements, but does not anticipate doing so earlier than mid-2017,
Slide 46: 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: 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% CCB (2.5%) 11.4
Slide 47: 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 48: 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 49: 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. $A440m, subject to the New Arrangements noted below. The buying period for the MEREP will commence on 17 May 2016 and is expected to be completed by 8 July 2
Slide 50: Outlook
For personal use only 4 Outlook Nicholas Moore – Managing Director and Chief Executive Officer
Slide 51: Short-term outlook
Short-term outlook For personal use only • Summarised below are the factors impacting the short-term performance for each Operating Group • FY17 results will vary with market conditions, particularly the capital markets facing businesses. Annuity-style businesses represent more than 70% of the Group
Slide 52: Short-term outlook
Short-term outlook For personal use only While the impact of future market conditions makes forecasting difficult, we currently expect the FY17 combined net profit contribution1 from operating groups to be broadly in line with FY16 The FY17 tax rate is currently expected to be broadly in line wi
Slide 53: Medium-term
Medium-term For personal use only Macquarie remains well positioned to deliver superior performance in the medium-term Deep expertise in major markets Build on our strength in diversity and continue to adapt our portfolio mix to changing market conditions ‒ Annuity-style income is provided by
Slide 54: Approximate business Basel III Capital & ROE
Approximate business Basel III Capital & ROE For personal use only 1 APRA Basel III Capital Approx. FY16 Return Approx. 10-Year Average 2 Operating Group @ 8.5% ($Ab) on Ordinary Equity2 Return on Ordinary Equity Annuity-style businesses 8.1 Macquarie Asset Management 1.4 Corporate and Asset Finance
Slide 55: 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 56: Additional information: Funding
For personal use only A Additional information Funding
Slide 57: 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 predominately to the Non-Bank Grou
Slide 58: Funded balance sheet reconciliation
Funded balance sheet reconciliation For personal use only The Group’s statement of financial position 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
Slide 59: Funding for the Group
Funding for the Group For personal use only Mar 16 Mar 15 $Ab $Ab Well diversified funding sources Funding sources Minimal reliance on short-term wholesale funding markets Negotiable certificates of deposits 0.4 1.4 Commercial paper 8.9 11.1 Deposit base represents 33%4 of total funding source
Slide 60: Funding for the Bank Group
Funding for the Bank Group For personal use only Mar 16 Mar 15 Bank balance sheet remains liquid, well capitalised and with a $Ab $Ab Funding sources diversity of funding sources Negotiable certificates of deposits 0.4 1.4 Term funding beyond one year (excluding equity) has a weighted Commercial
Slide 61: Funding for the Non-Bank Group
Funding for the Non-Bank Group For personal use only Mar 16 Mar 15 $Ab $Ab Funding sources Non-Bank Group is predominately term funded Net Trade Creditors 0.3 0.1 Term funding beyond one year (excluding equity) has a Structured notes 0.4 0.5 weighted average term to maturity of 4.7 years Secured
Slide 62: Explanation of Funded Balance Sheet reconciling items
Explanation of Funded Balance Sheet reconciling items For personal use only Self-funded trading assets: Macquarie enters into stock borrowing and lending as well as repurchase agreements and reverse repurchase agreements in the normal course of trading activity that it conducts with its clients an
Slide 63: 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 during a period of liquidity stress: ‒ a minimum 12 month period with constr
Slide 64: Additional information: Capital
For personal use only B Additional information Capital
Slide 65: Macquarie Group Basel III regulatory capital
Macquarie Group Basel III regulatory capital For personal use only Surplus calculation Harmonised APRA Basel III Basel III 31 March 2016 $Am $Am Macquarie Group eligible capital: Bank Group Gross Tier 1 capital 13,465 13,465 Non-Bank Group eligible capital 3,783 3,783 Eligible capital 17,248 17,248
Slide 66: Macquarie Group APRA Basel III regulatory capital
Macquarie Group APRA Basel III regulatory capital For personal use only Bank Group contribution Risk-weighted assets Tier 1 Deductions Capital Requirement1 31 March 2016 $Am $Am $Am Credit risk On balance sheet 62,591 5,320 Off balance sheet 16,811 1,429 Credit risk total2 79,402 6,749 Market risk 3
Slide 67: Macquarie Group regulatory capital: Non-Bank Group contribution
Macquarie Group regulatory capital For personal use only Non-Bank Group contribution 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 68: Macquarie Group regulatory capital: Non-Bank Group contribution
Macquarie Group regulatory capital For personal use only Non-Bank Group contribution Capital Assets Requirement Equivalent Risk 31 March 2016 $Ab $Am Weight Funded assets Cash and liquid assets 1.5 18 15% Loan assets1 1.6 120 94% Debt investment securities 0.5 68 169% Co-investment in Macquarie-mana
Slide 69: Glossary
For personal use only Glossary C
Slide 70: Glossary
Glossary For personal use only $A / AUD Australian Dollar CAF Corporate and Asset Finance $C Canadian Dollar CCB Capital Conservation Buffer € / EUR Euro CET1 Common Equity Tier 1 £ / GBP British Pound CFM Commodities and Financial Markets $US / USD United States Dollar CHESS Australian Clearing Hou
Slide 71: Glossary
Glossary For personal use only FUM Funds Under Management MAM Macquarie Asset Management FX Foreign Exchange MBL Macquarie Bank Limited FY07 Full Year ended 31 March 2007 MCN Macquarie Capital Notes FY09 Full Year ended 31 March 2009 MEC Metals and Energy Capital FY11 Full Year ended 31 March 2011 M
Slide 72: Glossary
Glossary For personal use only NPAT Net Profit After Tax NSFR Net Stable Funding Ratio OTC Over the Counter P&L Profit and Loss Statement PPE Property, Plant and Equipment PPP Public Private Partnership RBA Reserve Bank of Australia REIT Real Estate Investment Trust RMG Risk Management Group ROE Ret
Slide 73: Presentation to investors and analysts
For personal use only Presentation to investors and analysts Result announcement for the full year ended 31 March 2016 6 May 2016