Slide 1: Result Announcement for the full year ended 31 March 2013
For personal use only Result Announcement for the full year ended 31 March 2013 Presentation to Investors and Analysts 3 May 2013 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 Introduction Stuart Green Head of Corporate Communications and Investor Relations 1 Macquarie Group Limited Result Announcement for the full year ended 31 March 2013 3 May 2013 – Presentation to Investors and Analysts 4
Slide 5: Overview of Result
For personal use only Overview of Result Nicholas Moore Managing Director and Chief Executive Officer 2 Macquarie Group Limited Result Announcement for the full year ended 31 March 2013 3 May 2013 – Presentation to Investors and Analysts 5
Slide 6: About Macquarie
About Macquarie Building for the medium term For personal use only Macquarie • Top 50 global asset manager with $A343.5b1 of assets under management • Provides clients with access to a diverse range of capabilities and products, including infrastructure and real asset management, securities Funds in
Slide 7: 2H13 result
2H13 result $A490m For personal use only • Net profit of $A490m, up 36% on 1H13 and up 15% on 2H12 • Operating income $A3.6b, up 18% on 1H13 and down 2% on 2H12 • As foreshadowed: – Macquarie’s annuity-style businesses (Macquarie Funds, Corporate and Asset Finance, Banking and Financial Services) co
Slide 8: FY13 result
FY13 result $A851m For personal use only • Net profit of $A851m, up $A121m (or 17%) on FY12 • Operating income $A6.7b, down $A263m (or 4%) on FY12 • As foreshadowed: – Macquarie’s annuity-style businesses (Macquarie Funds, Corporate and Asset Finance, Banking and Financial Services) continued to per
Slide 9: FY13 result
FY13 result For personal use only 2H13 1H13 Mar 13 Mar 12 $Am $Am $Am $Am Net operating income 3,631 3,069 6,700 6,963 Total operating expenses (2,743) (2,552) (5,295) (5,914) Operating profit before income tax 888 517 1,405 1,049 Income tax expense (377) (156) (533) (287) Profit attributable to non
Slide 10: Financial performance
Financial performance For personal use only FY13 Operating income of $A6,700m FY13 Profit of $A851m $Am FY13 down 4% on FY12 $Am FY13 up 17% on FY12 2H13 up 18% on 1H13 800 2H13 up 36% on 1H13 4,000 400 2,000 0 0 1H11 2H11 1H12 2H12 1H13 2H13 1H11 2H11 1H12 2H12 1H13 2H13 FY13 EPS of $A2.51 FY13 DPS
Slide 11: Assets under management of $A347b
Assets under management of $A347b For personal use only • AUM increased $A20b or 6% since 31 Mar 12, primarily driven by positive market and valuation movements and investments in the infrastructure and real assets business $Ab 400 Fixed income Direct infrastructure Equities Cash Direct real estate
Slide 12: Diversified income
Diversified income Net operating income by source For personal use only Net operating income 12 months to 31 Mar 12 12 months to 31 Mar 13 $A7.0b $A6.7b Institutional and retail cash equities Equity 14% derivatives 24% 13% 4% 25% 5% Securities funds management and administration M&A and advisory inc
Slide 13: Diversified by region
Diversified by region International income1 63% of total Total staff 13,663; International staff 55% of total For personal use only EUROPE, MIDDLE EAST ASIA AMERICAS & AFRICA2 Income: $A1,221m (19% of total) Income: $A743m (11% of total) Income: $A2,199m (33% of total) Staff: 1,193 Staff: 3,093 Staf
Slide 14: Diversified income: Net operating income by region
Diversified income Net operating income by region For personal use only • 63% of operating income1 in FY13 is generated offshore • FX translation estimated to have a minimal impact on the FY13 result compared to FY12 $Am 1,600 2H11 2H11 1H12 1H12 1,400 2H12 2H12 1,200 1H13 1H13 2H13 1,000 2H13 800 6
Slide 15: Macquarie Funds
Macquarie Funds FY13 Operating income of $A1,514m, up 7% on prior year FY13 Net profit contribution of $A755m, up 17% on prior year For personal use only AUM of $A343.5b up 6% on prior year Macquarie Infrastructure and Real Assets Macquarie Investment Management Macquarie Specialised Investment Solu
Slide 16: Corporate and Asset Finance
Corporate and Asset Finance FY13 Operating income of $A1,052m, down 2% on prior year FY13 Net profit contribution of $A694m, down 1% on prior year For personal use only Asset and loan portfolio of $A22.4b up 9% on prior year Corporate Lending $A7.9b1 broadly in line with FY12 Asset Finance $A14.5b u
Slide 17: Banking and Financial Services
Banking and Financial Services FY13 Operating income of $A1,383m, up 1% on prior year FY13 Net profit contribution of $A335m, up 22% on prior year For personal use only Global client numbers 1.13 million; Australian clients numbers approx. 1 million Private Wealth/Direct Intermediary Relationship Ba
Slide 18: Macquarie Securities
Macquarie Securities FY13 Operating income of $A752m, down 16% on prior year FY13 Net loss of $A50m an improvement from a net loss of $A194m in prior year For personal use only 2H13 profit of $A14m up from a net loss of $A64m in 1H13 Market Conditions Australia Asia North America EMEA Activity Activ
Slide 19: Macquarie Capital
Macquarie Capital FY13 Operating income of $A620m, down 6% on prior year FY13 Net profit contribution of $A150m, up 76% on prior year For personal use only 447 transactions valued at $A85b1 in FY13 (435 transactions valued at $A97b in FY12) Advisory fee income down 5% on FY12, ECM fee income down 5%
Slide 20: Fixed Income, Currencies and Commodities
Fixed Income, Currencies and Commodities FY13 Operating income of $A1,303m, down 4% on prior year FY13 Net profit contribution of $A563m, up 4% on prior year For personal use only Commodity Markets (Physical & Financial) Financial Markets (Primary & Secondary) 11% of operating 54% of operating incom
Slide 21: Cost Performance
Cost Performance For personal use only • FY13 operating expenses (excluding brokerage and commission expenses) $A4.6b; down $A0.5b on FY12 – Achieved by ongoing cost reduction initiatives including centralisation of support functions and continued focus on costs – Select investment in growth areas i
Slide 22: 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 • Surplus funding capacity continues to be deployed • Total deposits1 increased to $A36.2b at Mar 13 from $A33.9b at Mar 12 • $A9.7b of new term
Slide 23: Funded balance sheet remains strong
Funded balance sheet remains strong For personal use only Macquarie Group Limited $Ab $Ab $Ab 90 31 March 2012 90 3031 September 2012 March 2012 90 31 March 2013 ST wholesale ST wholesale ST wholesale issued paper (6%) issued paper (6%) issued paper (7%) 80 80 Other debt1 maturing in the next 12 mth
Slide 24: Basel III capital surplus
Basel III capital surplus For personal use only • Harmonised Basel III Group capital of $A12.9b, Group surplus of $A3.4b at Mar 131 1. Calculated at 8.5% RWA which includes the 2.5% capital conservation buffer (CCB) not required to be met by APRA until 2016 and by BIS until 2019. 2. ‘Harmonised’ Bas
Slide 25: Dividends
Dividends For personal use only • FY13 dividend set at $A2.00, 79% payout ratio, up on FY12 dividend of $A1.40 – 2H13 dividend $A1.25 up on 1H13 dividend of $A0.75 – 2H13 dividend is 40% franked • The Board has resolved that the annual dividend payout ratio policy will be in the range of 60-80% 25
Slide 26: Board and Management changes
Board and Management changes For personal use only • Catherine Livingstone has notified the Board of her intention not to seek re-election at the upcoming Annual General Meeting and accordingly will be retiring as a director of Macquarie Group Limited and Macquarie Bank Limited – Michael Coleman wil
Slide 27: Result Analysis and Financial Management
For personal use only Result Analysis and Financial Management Patrick Upfold Chief Financial Officer 3 Macquarie Group Limited Result Announcement for the full year ended 31 March 2013 3 May 2013 – Presentation to Investors and Analysts 27
Slide 28: Income Statement key drivers
Income Statement key drivers For personal use only 2H13 1H13 Mar 13 Mar 12 • Net interest income up 3% on FY12 to $A1,367m SAm $Am $Am $Am – Growth in finance lease portfolios and interest bearing investments in Macquarie Capital Net interest income 723 644 1,367 1,333 – Partially offset by reduced
Slide 29: Macquarie Funds
Macquarie Funds Result For personal use only Mar 13 Mar 12 • Base fees up 9% on FY12 to $A989m driven by: $Am $Am – Increase in AUM (up 6%) largely as a result of favourable market movements Base fees 989 905 and transfer of Professional Series from BFS Performance fees 164 125 – Increase in EUM (up
Slide 30: Corporate and Asset Finance
Corporate and Asset Finance Result For personal use only Mar 13 Mar 12 • Net interest and trading income broadly flat on FY12 $Am $Am – Growth in loan and finance lease portfolios (up 9%) with particularly strong growth in motor vehicles Net interest and trading income1 579 586 – Offset by increased
Slide 31: Banking and Financial Services
Banking and Financial Services Result For personal use only Mar 13 Mar 12 • Net interest and trading income up 4% on FY12 $Am $Am – Retail deposits up 7%, improved volumes in Relationship Banking Net interest and trading income1 733 703 – Partially offset by lower loan portfolio due to the sale/run
Slide 32: Macquarie Securities
Macquarie Securities Result For personal use only Mar 13 Mar 12 • Cash equities business profitable in FY13 $Am $Am – Brokerage and commission income down 14% on FY12 reflecting weak market conditions, offset by increased volumes in the 4th quarter, improved client Brokerage and commissions 450 525
Slide 33: Macquarie Capital
Macquarie Capital Result For personal use only Mar 13 Mar 12 • Fee and commission income down 5% on FY12 $Am $Am – Continued subdued market conditions leading to lower advisory and ECM income partially offset by improved DCM/Debt Advisory income Fee and commission income 542 573 – Advisory and capit
Slide 34: Fixed Income, Currencies and Commodities
Fixed Income, Currencies and Commodities Result For personal use only • Commodities trading income up 24% on FY12 Mar 13 Mar 12 $Am $Am – Energy markets experienced strong customer flow across the global platform, particularly in the oil business Commodities1 713 573 – Agricultural markets benefited
Slide 35: Balance sheet highlights
Balance sheet highlights For personal use only • Balance sheet remains strong and conservative – Term assets covered by term funding, stable deposits and equity – Minimal reliance on short term wholesale funding markets • Surplus funding continues to be deployed whilst maintaining conservative liqui
Slide 36: Well diversified funding sources
Well diversified funding sources For personal use only Diversity of MGL funding sources MGL term funding (drawn and undrawn1) Wholesale issued paper Deposits - maturing beyond one year (including equity corporate & Equity & hybrids wholesale and hybrids) $Ab Equity & hybrids Loan capital GG Debt Deb
Slide 37: Continued deposit growth
Continued deposit growth For personal use only • Macquarie has been successful in pursuing its strategy of diversifying its funding sources through growing its deposit base – Represents in excess of 40% of the Group’s funding sources – 600,000+ retail depositors – Focus on the composition and qualit
Slide 38: Loan portfolio growth – Funded Balance Sheet
Loan portfolio1 growth – Funded Balance Sheet For personal use only Mar 13 Mar 12 Category $Am $Am Mortgages: Australia 6.8 3.0 United States 0.7 0.7 Canada 6.7 8.2 Other 0.2 0.1 Total mortgages 14.4 12.0 Structured investments 3.6 2.9 Banking 4.0 4.0 Real Estate 2.3 1.8 Resources and commodities 2.
Slide 39: Equity investments of $A5.2b
Equity investments of $A5.2b1 For personal use only Carrying Carrying value2 value2 Mar 13 Mar 12 Category $Am $Am Description Macquarie Funds (MIRA) managed 1,143 871 Macquarie Atlas Roads, Macquarie SBI Infrastructure Company, Macquarie Infrastructure funds Company, Macquarie International Infrast
Slide 40: Stable Bank Group Basel III CET1 Ratio
Stable 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: 11.6%; Tier 1: 12.7% • Basel III applies only to the Bank Group and not the Non-Bank Group 1.‘Harmonised’ Basel III estimates assume alignme
Slide 41: Capital Management Update
Capital Management Update For personal use only • In FY13, purchased $A251m of shares under the buyback at a weighted average price of $A25.58 • The Board has resolved1: – To purchase shares on-market2 to satisfy the MEREP requirements of approx. $A250m. The buying period for the MEREP will commence
Slide 42: Outlook
For personal use only Outlook Nicholas Moore Managing Director and Chief Executive Officer 4 Macquarie Group Limited Result Announcement for the full year ended 31 March 2013 3 May 2013 – Presentation to Investors and Analysts 42
Slide 43: Short term outlook
Short term outlook For personal use only • Summarised below are the outlook statements for each Operating Group • FY14 results will vary with market conditions, particularly the capital markets facing businesses which continue to experience subdued market conditions Net profit contribution FY07- FY1
Slide 44: Short term outlook
Short term outlook For personal use only • While market volatility makes forecasting difficult, subject to market conditions it is currently expected that the FY14 net profit contribution from operating groups will be up on FY13 • Tax rate is currently expected to be in the mid 30% range based on th
Slide 45: Medium term
Medium term For personal use only Macquarie remains well positioned to deliver superior performance in the medium term • Deep expertise in major markets • Build on our strength in diversity and continue to adapt our portfolio mix to changing market conditions – Annuity-style income is provided by th
Slide 46: Approximate business Basel III & ROE
Approximate business Basel III & ROE For personal use only APRA Basel III Capital Approx. FY13 Return Operating Group @ 8.5% ($Ab) on Ordinary Equity1 Annuity-style businesses Approx. 7-Year Average Return on Ordinary Equity1 Macquarie Funds Group 1.8 Corporate and Asset Finance 2.1 20% 20%2 Banking
Slide 47: Medium term
CCIR 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
Slide 48: Appendix A: Additional Information – Funding
For personal use only Appendix Additional Information – Funding A Macquarie Group Limited Result Announcement for the full year ended 31 March 2013 3 May 2013 – 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 March 2013
Funding for the Group 31 March 2013 For personal use only Mar 13 Mar 12 $Ab $Ab • Well diversified funding sources Funding sources Negotiable certificates of deposits 1.4 1.7 • Minimal reliance on short term wholesale funding markets Commercial paper 3.5 - 4.6 0.2 • Deposit base represents 41% of to
Slide 52: Funding for the Bank Group March 2013
Funding for the Bank Group 31 March 2013 For personal use only Mar 13 Mar 12 $Ab $Ab • Bank balance sheet remains very liquid, well capitalised and Funding sources with a diversity of funding sources Negotiable certificates of deposits 1.4 1.7 Commercial paper 3.5 4.6 • Term funding beyond one year
Slide 53: Funding for the Non-Bank Group March 2013
Funding for the Non-Bank Group 31 March 2013 For personal use only Mar 13 Mar 12 $Ab $Ab • Non-Bank Group is predominantly term funded Funding sources • Term funding beyond one year (excluding equity) has a Structured notes 1.0 0.6 Secured funding 0.1 0.2 weighted average term to maturity of 5.9 yea
Slide 54: 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 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 B: Additional Information – Capital
For personal use only Appendix Additional Information – Capital B Macquarie Group Limited Result Announcement for the full year ended 31 March 2013 3 May 2013 – 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 31 March 2013 $Am $Am Macquarie Group eligible capital: Bank Group Gross Tier 1 capital 8,955 8,955 Non-Bank Group eligible capital 3,993 3,993 Eligible capital 12,948 12,948 (a
Slide 58: Macquarie Group Harmonised Basel III regulatory capital
Macquarie Group Harmonised Basel III regulatory capital Bank Group contribution For personal use only Risk-weighted Capital assets Tier 1 Deductions Requirement1 31 March 2013 $Am $Am $Am Credit risk On balance sheet 31,594 2,211 Off balance sheet 11,102 777 Credit risk total 42,696 2,988 Equity ris
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-Bank Group contribution
Macquarie Group regulatory capital Non-Bank Group contribution For personal use only Assets Capital Requirement Equivalent Risk 31 March 2013 $Ab $Am Weight Funded assets Cash and liquid assets 1.8 20 14% Loan assets1 1.4 149 133% Assets held for sale2 - Debt investment securities 0.2 5 30% Co-inves
Slide 61: Appendix C: Glossary
For personal use only Appendix Glossary C Macquarie Group Limited Result Announcement for the full year ended 31 March 2013 3 May 2013 – Presentation to Investors and Analysts 61
Slide 62: Glossary
Glossary For personal use only $A Australian Dollar BFS Banking and Financial Services $C Canadian Dollar CAF Corporate and Asset Finance $US United States Dollar CCB Capital Conservation Buffer € Euro CCP Central Counterparty 1H13 Half Year ended 30 September 2012 CET1 Common Equity Tier 1 2H12 Hal
Slide 63: Glossary
Glossary For personal use only ECAM Economic Capital Adequacy Model GDR Global Depository Receipt ECM Equity Capital Markets GFC Global Financial Crisis EMEA Europe, the Middle East and Africa GG Government Guaranteed EPS Earnings Per Share HK Hong Kong EUM Equity Under Management HR Human Resources
Slide 64: Glossary
Glossary For personal use only MEC Metals and Energy Capital NZ New Zealand MEIF Macquarie European Infrastructure Fund Operating Revenues less those expenses directly attributable MEREP Macquarie Group Employee Retained Equity Plan Income to the revenues MFG Macquarie Funds Group P&L Profit and Los
Slide 65: Result Announcement for the full year ended March 2013
For personal use only Result Announcement for the full year ended 31 March 2013 Presentation to Investors and Analysts 3 May 2013 Nicholas Moore, Managing Director and Chief Executive Officer Patrick Upfold, Chief Financial Officer