Macquarie Group, Ltd. · ASX:MQG
Macquarie — Debt Investor Presentation (May 2018)
53 slides from Macquarie's debt investor presentation, May 7, 2018
Slide 1: Macquarie Group Capital Notes 3 Offer
For personal use only Macquarie Group Capital Notes 3 Offer PAGE 1
Slide 2: Important notice and disclaimer
Important notice and disclaimer For personal use only This presentation has been prepared by Macquarie Group Limited ABN 94 122 169 279 (“MGL”) in relation to its proposed offer of Macquarie Group Capital Notes 3 (“MCN3”) as described in this presentation. A Prospectus in respect of MCN3 was lodged
Slide 3: ASIC Guidance
ASIC Guidance For personal use only Please consider ASIC Guidance before investing. www.moneysmart.gov.au/investing MCN3 are a complex investment and may be difficult to understand, even for experienced investors and involve different risks from a simple debt or ordinary equity security. You should
Slide 4: Overview of the Macquarie Group
For personal use only Overview of the Macquarie Group 01 PAGE 4
Slide 5: Macquarie overview
Macquarie overview For personal use only Diversified financial group providing clients with asset management and finance, banking, advisory and risk and capital solutions across debt, equity and commodities Macquarie Group overview1 Global locations Annuity-style businesses Capital markets facing bu
Slide 6: Years of profitability and history
49 years of profitability For personal use only 2.0 Hill Samuel UK opens $Am branch office in Sydney 1.6 1.2 Currency Recession Crisis 0.8 0.4 - 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 Hills Motorway Global real Mortgage securitisation $Am 100 estate crash US banks London Recession 80
Slide 7: Macquarie funding structure
Macquarie funding structure For personal use only • MGL and MBL are Macquarie’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
Slide 8: Diverse business mix
ABOUT MACQUARIE Diverse business mix For personal use only Annuity-style businesses (~70%) Capital markets facing businesses (~30%) Macquarie Asset Management (MAM) Commodities and Global Markets (CGM) Top 50 global asset manager with $A495.1b1 Integrated, end-to-end offering across global markets i
Slide 9: FY18 result: $A2,557m up 15% on FY17
FY18 result: $A2,557m up 15% on FY17 For personal use only 2H18 1H18 2H18 v FY18 FY17 FY18 v $Am $Am 1H18 $Am $Am FY17 Net operating income 5,523 5,397 2% 10,920 10,364 5% Total operating expenses (3,763) (3,693) 2% (7,456) (7,260) 3% Operating profit before income tax 1,760 1,704 3% 3,464 3,104 12%
Slide 10: FY18 net profit contribution from operating groups
FY18 net profit contribution from operating groups $A5,061m up 8% on FY17 For personal use only ANNUITY-STYLE BUSINESSES CAPITAL MARKETS FACING BUSINESSES $A3,451m 6% ON FY17 $A1,610m 11% ON FY17 MAM: on FY17 Strong result with increased performance fees, partially CGM: on FY17 offset by higher impa
Slide 11: Macquarie Asset Management
MAM 33 % Macquarie Asset Management For personal use only Annuity-style business Top 50 global asset manager with $A495.1b of assets under management OPERATING OPERATINGINCOME INCOME % $A2,792m $A2,596m 8 ON FY17 • Provides clients with access to a diverse range of NET NETPROFIT PROFITCONTRIBUTION C
Slide 12: Corporate and Asset Finance
CAF 24 % Corporate and Asset Finance For personal use only Annuity-style business OPERATING INCOME $A34.5b asset and loan portfolio 3 %% Delivers tailored finance and asset management $A1,889m ON FY17 % ON FY16 solutions to clients through the cycles Principal Finance Vehicles NET PROFIT CONTRIBUT
Slide 13: Banking and Financial Services
BFS 11 % Banking and Financial Services For personal use only Annuity-style business OPERATING INCOME BROADLY $A45.7b total BFS deposits1 $A1,646m IN LINE WITH FY17 Provides a diverse range of personal banking, NET PROFIT CONTRIBUTION wealth management and business banking products and services De
Slide 14: Commodities and Global Markets
Commodities and Global Markets CGM 18 % For personal use only Capital markets facing business OPERATING INCOME Providing clients with an integrated, end-to-end service across global markets $A2,907m 1% ON FY17 • Expertise in providing clients with access to markets, financing, NET PROFIT CONTRIBUTIO
Slide 15: Macquarie Capital
Macquarie Capital MacCap 14 % For personal use only Capital markets facing business OPERATING INCOME Global capability in M&A advisory, debt and equity capital markets and balance sheet positions $A1,491m 24 % ON FY17 Global capability across Infrastructure & FINANCIAL INSTITUTIONS NET PROFIT CONT
Slide 16: Long standing conservative risk management framework
Long standing conservative risk management framework For personal use only Macquarie’s core risk management principles have remained stable and continue to be effective The key aspects of Macquarie’s risk management approach are: Ownership of risk at Understanding worst-case Requirement for inde
Slide 17: Stable earnings
Stable earnings For personal use only 5 year earnings volatility relative to Macquarie 10 year earnings volatility relative to Macquarie (since GFC) (includes GFC) Multiple to Macquarie Multiple to Macquarie 3.5 20.0 19.2x 3.1x 3.0 2.9x 16.0 2.5 12.0 2.0 1.6x 1.5 8.0 1.1x 1.0x 5.2x 1.0 0.6x 4.0 2.6x
Slide 18: Diversification by region
Diversification by region For personal use only International income 67% of total income1 Asia Total staff 14,469; International staff 54% of total Staff 11% of total income 3,428 EMEA Income Staff $A1,229m 1,766 29% Income Assets under management Americas of total income $A51.7b $A3,076m employing
Slide 19: Macquarie's Australian businesses
Macquarie’s Australian businesses For personal use only Bank Macquarie’s Australian businesses Group BFS Other Non-bank 10 locations FY18 Net operating income for Australian businesses $Am 3,517 $Am 1,640 $Am 1,067 $Am 810 6,645 staff Brisbane Gold Coast Australian income as a proportion of Group to
Slide 20: Outlook
For personal use only Outlook PAGE 20 02
Slide 21: Factors impacting short-term outlook
Factors impacting short-term outlook For personal use only Annuity-style businesses Capital markets facing businesses Macquarie Asset Management Commodities and Global Markets • FY18: $A1.7b up 10% on FY17 MAM • FY18: $A0.9b down 6% on FY17 • Base fees expected to be up, benefiting from • Strong cus
Slide 22: Short-term outlook
Short-term outlook For personal use only • The Group’s result for FY19 is currently expected to be broadly in line with FY18 • Our short-term outlook remains subject to: — Market conditions — The impact of foreign exchange — Potential regulatory changes and tax uncertainties — Geographic composition
Slide 23: Medium-term
Medium-term For personal use only • Macquarie remains well positioned to deliver superior performance in the medium-term • Deep expertise in major markets • Build on our strength in diversity and continue to adapt our portfolio mix to changing market conditions — Annuity-style income is provided by
Slide 24: Approximate business Basel III capital and ROE
Approximate business Basel III Capital & ROE For personal use only As at 31 Mar 18 1 APRA Basel III Capital Approx. FY18 Return Approx. 12-Year Average Operating Group 2 @ 8.5% ($Ab) on Ordinary Equity2 Return on Ordinary Equity Annuity-style businesses 8.9 Macquarie Asset Management 2.2 Corporate a
Slide 25: Medium-term
Medium-term For personal use only Annuity-style businesses Capital markets facing businesses Macquarie Asset Management (MAM) Commodities and Global Markets (CGM) Annuity-style business that is diversified across regions, Opportunities to grow commodities business, both products, asset classes and i
Slide 26: Capital and Funding
For personal use only Capital and Funding 03 PAGE 26
Slide 27: Strong regulatory ratios
Strong regulatory ratios For personal use only Bank Group (Mar 18) 17.5% 7.0% 6.9% 190% 115% 112% 13.5% 110% 14.0% 6.0% 160% 162% 6.0% 10.5% 5.0% 130% 105% 11.0% 7.0% 4.0% 100% 100% 3.5% 3.0% 70% 95% - 2.0% 40% 90% CET1 ratio Leverage ratio LCR 1 NSFR Bank Group (Harmonised ) 2 Bank Group (APRA)
Slide 28: Basel III capital position
Basel III capital position For personal use only APRA Basel III Group capital at Mar 18 of $A19.1b, Group capital surplus of $A4.2b1 APRA Basel III Bank Group CET1 ratio: 11.0%2 Harmonised Basel III3 CET1 ratio: 13.5%4 9.0 Group regulatory surplus: Basel III (Mar 18) 8.0 7.0 (1.4) (2.0) 2.6 6.0 (2.1
Slide 29: Business growth
Business growth For personal use only KEY DRIVERS Increase in MAM of $A0.5b mainly due to acquisitions: —Net increase of $A0.1b due to on-balance sheet investments $Ab Business Business CapitalRequirements Capital Requirements 1 1 to seed new MIRA products and mandates 15.0 0.1 —Net increase of $A
Slide 30: 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. $A460m. The buying period for the MEREP will commence on 14 May 18 and is expected to be completed by 29 Jun 183 ‒ MQG shares sold by staff between 14 May 18
Slide 31: Regulatory and tax update
Regulatory and tax update For personal use only • Regulatory capital1 - In Jul 17 APRA provided guidance on the level of CET1 capital ratios for Australian banks to be considered ‘unquestionably strong’ (UQS), indicating an average increase of 150bps across the industry would be required2 - In Feb 1
Slide 32: 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, up 1% to $A48.1b as at Mar 18 from $A47.8b as at Mar
Slide 33: 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 34: Funded balance sheet remains strong
Funded balance sheet remains strong For personal use only Term liabilities exceed term assets 31 Mar 17 31 Mar 18 $Ab $Ab 140 140 TOTAL CUSTOMER DEPOSITS8 120 ST wholesale issued paper (5%) 120 ST wholesale issued paper (7%) Other debt maturing in the $A48.1b FROM MAR 17 1% Other debt maturing in th
Slide 35: Diversified issuance strategy
Diversified issuance strategy For personal use only Term funding as at 31 Mar 18 – diversified by currency1, tenor2 and type Currency Tenor Type Loan Covered GBP capital Bonds Securitisations 7% Syndicated 1% EUR 2% CHF > 1 yr 1-2yrs loan facility 8% 2% JPY 9% 16% 6% PUMA RMBS 5% • Well diversified
Slide 36: MCN3 Offer
For personal use only MCN3 Offer PAGE 36 04
Slide 37: Overview of the Offer
Macquarie Group Capital Notes 3 Offer For personal use only Overview of the Offer Issuer Macquarie Group Limited (“MGL”) Type of security Fully paid, unsecured, subordinated, non-cumulative, mandatorily convertible notes (“MCN3”), automatically convertible at the point of Non-Viability of MGL (w
Slide 38: MCN3 Key Terms: Distributions
MCN3 Key Terms For personal use only Distributions Distributions on MCN3 are discretionary, non-cumulative floating rate payments Distributions are scheduled to be paid in arrears commencing on 17 September 2018 and thereafter quarterly, subject to the Payment Conditions, until MCN3 are Exchange
Slide 39: MCN3 Key Terms: Mandatory Exchange
MCN3 Key Terms For personal use only Mandatory Exchange MGL must Exchange MCN3 into Ordinary Shares on 15 December 2027 (if MCN3 have not been Redeemed, Exchanged or Written-Off beforehand) provided that certain Exchange Conditions are satisfied Mandatory Exchange The conditions to Mandatory Exc
Slide 40: MCN3 Key Terms: Optional Exchange and Non-Viability Event
MCN3 Key Terms Optional Exchange and Exchange on an Acquisition Event or Non- For personal use only Viability Event Optional Exchange MGL may choose to Exchange all or some MCN3 on 16 December 2024, 16 June 2025 or 15 December 2025 or if there has been a Tax Event or a Regulatory Event MGL will
Slide 41: Summary of certain events during the term of MCN3
MCN3 Key Terms For personal use only Summary of certain events that may occur during the term of MCN3 APRA approval Do conditions What value will a MCN3 In what form will the value be Event When could this occur? Consequences required?1 apply?2 holder receive (per MCN3)?3 provided to MCN3 Holders? T
Slide 42: Comparison between MCN3 and other Macquarie Securities
MCN3 Key Terms For personal use only Comparison between MCN3 and other Macquarie Securities Feature Term deposit BCN MCN MCN2 MCN3 Ordinary Shares Issuer Bank, credit union or Macquarie Bank Macquarie Group Macquarie Group Macquarie Group Macquarie Group building society (e.g. Limited Limited Limite
Slide 43: Ranking in a winding up of MGL
MCN3 Key Terms For personal use only Ranking in a winding up of MGL In a Winding Up of MGL, MCN3 will rank ahead of Ordinary Ranking Illustrative examples Shares, equally with Equal Ranking Obligations, but behind all Senior Creditors of MGL However, any return on MCN3 may be adversely affected
Slide 44: Investment Risks
For personal use only Investment Risks 06 PAGE 44
Slide 45: Key risks
Key risks For personal use only Outlined below are some of the key risks associated with an investment in MCN3 There are risks associated with an investment in MCN3, many of which are outside the control of MGL. These risks include those in Section 1.3 and Section 5 of the Prospectus. Before app
Slide 46: Key risks (cont.)
Key risks (cont.) For personal use only Key risk Overview Market Price and Liquidity of MCN3 The market price of MCN3 may go up or down and there is no guarantee MCN3 will trade at or above their Issue Price. For example, the market price of MCN3 may decline if better rates of return are available
Slide 47: Key risks (cont.)
Key risks (cont.) For personal use only Key risk Overview Changes in Distribution rate The Distribution Rate will fluctuate (both increasing and decreasing) over time as a result of movements in the Reference Rate A higher Franking Rate for a Distribution will result in a lower Distribution Rate
Slide 48: Key risks (cont.)
Key risks (cont.) For personal use only Key risk Overview MGL has rights for Exchange, Redemption or MGL may elect to Exchange, Redeem or arrange a Resale of all or some MCN3 in certain circumstances, subject to a Resale at its election number of conditions, including prior written approval from A
Slide 49: Key risks (cont.)
Key risks (cont.) For personal use only Key risk Overview Restrictions on rights and ranking in a MCN3 are not deposit liabilities or protected accounts of MBL or MGL and are not guaranteed or insured by any Winding Up of MGL government, government agency or compensation scheme of Australia or any
Slide 50: Key Dates and Contacts
For personal use only Key Dates and Contacts 07 PAGE 50
Slide 51: Key Dates
Key Dates For personal use only KEY DATES FOR OFFER DATE KEY DATES FOR REINVESTMENT OFFER DATE Record date for determining Eligible Securityholders Friday, 4 May 2018 Record date for determining Eligible MCN Holders Friday, 4 May 2018 Lodgement of the initial Prospectus Monday, 7 May 2018 Opening Da
Slide 52: Key Contacts
Key Contacts For personal use only Issuer Stuart Green, Group Treasurer Brad Milson, Division Director Macquarie Group Limited +61 2 8232 8845 +61 2 8232 7550 Sole Arranger Jacqui Vanzella Michael Daley Macquarie Capital (Australia) Limited +61 2 8232 4904 +61 2 8237 7799 Joint Lead Managers Tariq H
Slide 53: For personal use only
For personal use only PAGE 53
Macquarie Group — Debt Investor Presentation (May 2018) on 6ix