Slide 1: Result Announcement for the half year ended 30 September 2011
Macquarie Group Limited For personal use only Result Announcement for the half year ended 30 September 2011 Presentation to Investors and Analysts 28 October 2011 Nicholas Moore, Managing Director and Chief Executive Officer Greg Ward, Chief Financial Officer
Slide 2: Disclaimer
Disclaimer For personal use only Disclaimer 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 summa
Slide 3: Agenda
Agenda For personal use only 1. Introduction – Richard Sheppard 2. Overview of Result – Nicholas Moore 3. Result Analysis and Financial Management – Greg Ward 4. Outlook – Nicholas Moore 5. Appendices 3
Slide 4: Introduction
For personal use only 1 Introduction Richard Sheppard Deputy Managing Director Macquarie Group Limited Result Announcement for the half year ended 30 September 2011 28 October 2011 – 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 2011 28 October 2011 – 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 $A324b1 of assets under management Provides clients with access to a diverse range of capabilities and products, including infrastructure and real Macquarie Funds asset management, securities inve
Slide 7: Group overview
Group overview For personal use only As previously stated, 1H12 has seen heightened levels of uncertainty in global financial markets. This has resulted in low levels of client activity such as ECM, significant volatility in capital and commodity markets and disruption to many capital markets func
Slide 8: Result
Result For personal use only Net profit of $A305m, down 24% on 1H11 and down 45% on 2H11 Operating income $A3.2b, down 11% on 1H11 and down 19% on 2H11 1H11 operating income benefited from the MAp AVS reclassification of $A95m Operating expenses $A2.8b, down 11% on 1H11 and down 12% on 2H11 Em
Slide 9: 1H12 result
1H12 result For personal use only Sep 11 Mar 11 Sep 10 Sep 11 v Sep 10 $Am $Am $Am Net operating income 11% 3,243 3,983 3,661 Total operating expenses 11% (2,828) (3,208) (3,165) Operating profit before income tax 16% 415 775 496 Tax expense 26% (107) (197) (85) Profit attributable to non-co
Slide 10: Financial performance
Financial performance For personal use only $Am 1H12 Operating income of $A3,243m $Am 1H12 Profit of $A305m 1H12 down 11% on 1H11 800 1H12 down 24% on 1H11 4,000 2,000 400 0 2H09 1H10 2H10 1H11 2H11 1H12 0 2H09 1H10 2H10 1H11 2H11 1H12 $A 1H12 EPS of $A0.87 $A 1H12 DPS of $A0.65 2.00 1H12 down 27% o
Slide 11: Assets under management of $A327b
Assets under management of $A327b For personal use only Increase in AUM resulting from: $A16.0b due to depreciation of the AUD as at 30 Sep 11, positively impacting Delaware and MIRA Net fund inflows of $A2.2b Offset by asset disposals of $A1.8b $Ab 350 Fixed income Direct infrastructure $A326b $A
Slide 12: Diversified income
Diversified income Operating income by source For personal use only Operating income before writedowns, impairments, equity accounted gains/(losses) and one-off items 12 months to 31 March 11 6 months to 30 Sep 11 $A7.6b $A3.3b Institutional and retail cash equities Equity derivatives 16% 16% 27% 25
Slide 13: Diversified by region
Diversified by region International income1 61% of total Total staff 15,088; International staff 54% of total For personal use only EUROPE, MIDDLE EAST ASIA AMERICAS & AFRICA2 Income: $A621m (19% of total) Income: $A401m (13% of total) Income: $A921m (29% of total) Staff: 1,497 Staff: 3,075 Staff: 3
Slide 14: Diversified income: operating income by region
Diversified income Operating income by region For personal use only 61% of operating income in 1H12 is generated offshore FX translation estimated to have a negative impact of approx. 5% due to strengthening of AUD compared to pcp by an average of 10% against major currencies over the period 1,800 1
Slide 15: Macquarie Funds
Macquarie Funds Operating income of $A766m, up 20% on pcp and up 17% on prior period Net profit contribution of $A410m, up 80% on pcp and up 60% on prior period For personal use only AUM of $A324b up 4% on pcp and up 6% on prior period Macquarie Infrastructure and Real Assets Macquarie Investment Ma
Slide 16: Corporate and Asset Finance
Corporate and Asset Finance Operating income of $A528m, up 38% on pcp and up 7% on prior period Net profit contribution of $A358m, up 46% on pcp and up 9% on prior period For personal use only Asset and loan portfolio of $A20.5b at 1H12, up 29% on pcp and up 5% on prior period Lending Leasing Loan
Slide 17: Banking and Financial Services
Banking and Financial Services Operating income of $A722m, down 1% on pcp and down 5% on prior period Net profit contribution of $A137m, up 2% on pcp and down 3% on prior period For personal use only Global client numbers 1.1 million, up 10% on pcp and up 6% on prior period Private Wealth/Direct Int
Slide 18: Macquarie Securities
Macquarie Securities Operating income of $A541m, down 13% on pcp and down 21% on prior period Net loss of $A19m down from profit of $A98m in pcp and profit of $A86m in prior period For personal use only Market Conditions Australia Asia US Europe Canada South Africa Activity Activity Activity Activit
Slide 19: Macquarie Capital
Macquarie Capital Operating income of $A266m, down 27% on pcp and down 51% on prior period Net profit contribution of $A5m, down 89% on pcp and down 97% on prior period For personal use only 214 transactions valued at $A41b1 (231 transactions valued at $A79b pcp, 316 transactions valued at $A80b pri
Slide 20: Fixed Income, Currencies and Commodities
Fixed Income, Currencies and Commodities Operating income of $A415m, down 24% on pcp and down 52% on prior period Net profit contribution of $A6m, down 96% on pcp and down 99% on prior period For personal use only Metals & Energy Agricultural Fixed Income & Energy Markets Credit Trading Asian Market
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 deposits increased to $A34.5b at Sep 11 from $A31.6b at Mar 11 Retail deposits increased to $A28.6b at Sep 11 from $A26.6b at Mar 11, pr
Slide 22: Funded balance sheet remains strong
Funded balance sheet remains strong For personal use only Macquarie Group Limited $Ab 30 September 2010 $Ab 31 March 2011 $Ab 30 September 2011 100 100 100 90 ST wholesale 90 90 ST wholesale issued paper (3%) issued paper (6%) ST wholesale issued paper (6%) Other debt1 maturing in the next 12 mths (
Slide 23: Interim dividends
Interim dividends For personal use only 1H12 dividend set at $A0.65 ~ 75% payout ratio 1H12 dividend down on 1H11 dividend of $A0.86 and down on 2H11 dividend of $A1.00 Dividend remains unfranked Dividend policy remains 50 – 60% annual payout ratio Dividend Reinvestment Plan shares for the 1H1
Slide 24: Capital Management Strategy
Capital Management Strategy For personal use only Basel II surplus capital has increased to $A3.5b from $A3.0b Although the details have not been finalised, our assessment is Macquarie Group has sufficient capital today to meet the Basel III capital rules as applied by APRA as at 1 January 2013
Slide 25: Management changes
Management changes For personal use only Deputy Managing Director of MQG and CEO of MBL, Richard Sheppard will retire on 20 December 2011 after 36 years with the Group and its predecessor, Hill Samuel Richard has been Deputy Managing Director since 1996 and, following the restructure, in 2007 beca
Slide 26: Result Analysis and Financial Management
For personal use only 3 Result Analysis and Financial Management Greg Ward Chief Financial Officer Macquarie Group Limited Result Announcement for the half year ended 30 September 2011 28 October 2011 – Presentation to Investors and Analysts 26
Slide 27: Income Statement key drivers
Income Statement key drivers For personal use only 1H12 2H11 1H11 Net interest income up 15% on pcp to $A698m $Am $Am $Am – Growth in lending and leasing volumes Net interest income 698 670 605 – Improved margins Fee and commission income 1,766 1,896 1,995 Fee and commission income down 11% on p
Slide 28: Macquarie Funds
Macquarie Funds Result For personal use only Sep 11 Mar 11 Sep 10 Base fees in line with pcp $Am $Am $Am – Strong inflows into equities and fixed income funds Base fees 440 431 441 – Partially offset by stronger AUD in the period and decline in Performance fees 89 15 14 equity markets Other fee an
Slide 29: Corporate and Asset Finance
Corporate and Asset Finance Result For personal use only Sep 11 Mar 11 Sep 10 Net interest income up 7% on pcp $Am $Am $Am – Loan and finance lease portfolio up 13% on pcp Net interest income1 296 284 277 – Early repayments on lending portfolio Fee, commission and trading 12 24 16 Operating leas
Slide 30: Banking and Financial Services
Banking and Financial Services Result For personal use only Sep 11 Mar 11 Sep 10 Net interest income up 6% on pcp $Am $Am $Am – Retail deposits up 8% from $A26.5b at Sep 10 to $A28.6b at Net interest income1 363 369 344 Sep 11 Base fees 22 22 54 – Australian mortgage portfolio down 15% from $A12.9
Slide 31: Macquarie Securities
Macquarie Securities Result For personal use only Sep 11 Mar 11 Sep 10 Net trading income up 11% on pcp $Am $Am $Am – Benefit from increased volatility and dislocation in some Net trading income markets 170 222 153 (including net interest income)1 – Decrease from prior period due to subdued global
Slide 32: Macquarie Capital
Macquarie Capital Result For personal use only Sep 11 Mar 11 Sep 10 Net interest expense down 20% on pcp $Am $Am $Am – Impact of stronger AUD on asset funding Net interest expense1 (47) (55) (59) Advisory and capital markets activity: 214 deals valued at approx. Fee and commission income 273 410
Slide 33: Fixed Income, Currencies and Commodities
Fixed Income, Currencies and Commodities Result For personal use only Sep 11 Mar 11 Sep 10 Commodities trading income up 42% on pcp $Am $Am $Am – Energy markets contribution up strongly on pcp due to Commodities1 279 421 197 increased client hedging activity Foreign exchange products1 27 25 13 – D
Slide 34: Cost Performance
Cost Performance For personal use only 1H12 operating costs $A2.8b, down $A0.4b on 2H11 Achieved through a range of initiatives including exiting unprofitable businesses, creating scalable platforms, reducing complexity, redesigning business and operating models and increasing the effective use of
Slide 35: Cost Performance Drivers
Cost Performance Drivers For personal use only Investment in growth areas 1H12 Cost saving initiatives 1H12 Distribution capability in Europe and US Merging US fixed income onto Delaware platform MFG Acquired Austrian investment management business $A6m Rationalised unprofitable business lin
Slide 36: 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 Surplus funding capacity continues to be deployed Minimal reliance on short term wholesale funding markets Retail deposits continuing to gro
Slide 37: Well diversified funding sources
Well diversified funding sources For personal use only MGL term funding (drawn and undrawn1) Diversity of MGL funding sources maturing beyond one year (including equity Wholesale and hybrids) issued paper Deposits - corporate & $Ab Equity & Hybrids wholesale 20 Equity & hybrids Loan capital Debt Loa
Slide 38: 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 600,000 are depositors Continuing focus on improving the compo
Slide 39: Loan portfolio growth
Loan portfolio growth For personal use only $Ab $Am 40 900 35 800 700 30 600 25 500 20 400 15 300 10 200 5 100 0 0 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mortgages CAF lending Banking Aircraf t leasing Structured investment loans Motor Vehicle leasing Resources & commodities Equipment leasing Oth
Slide 40: Equity investments of $A5.6b
Equity investments of $A5.6b For personal use only Carrying Carrying value1 value1 Sep 11 Mar 11 Category $Am $Am Description Debt investment entities 41 79 Largely relates to holding in Diversified CMBS Investments Inc. Underlying investments are commercial mortgage-backed securities that are highl
Slide 41: Increased capital surplus
Increased capital surplus For personal use only Group capital of $A12.4b at 30 Sep 11, a $A3.5b buffer of capital in excess of the Group‟s minimum regulatory capital requirements Strong Banking Group capital ratios - Tier 1: 12.1% (Core Tier 11: 11.3%); Total Capital: 15.2% $Ab 4.0 0.4 (0.3) On-
Slide 42: Basel III update
Basel III update For personal use only APRA released its first Basel III discussion paper on 6 September 2011: Paper is subject to industry feedback by 2 December 2011. Draft standards to be released in early 2012 APRA proposes to adopt all Basel III reforms, but with some additional “in-princip
Slide 43: Pro-forma Basel III Group Regulatory Capital Surplus
Pro-forma Basel III Group Regulatory Capital Surplus For personal use only $Ab 5.0 Group regulatory surplus1: Basel III pro forma (Sep 11) 4.5 Excludes (0.2) future 4.0 0.8 (0.4) retained 3.5 earnings 3.5 (0.5) 3.2 3.0 3.0 Harmonised Basel III requirements 2.5 Approx. $A300m reduction in Group surpl
Slide 44: Pro-forma Basel III Common Equity Tier 1 capital ratio
Pro-forma Basel III Common Equity Tier 1 capital ratio For personal use only MBL Common Equity Tier 1 (CET1) ratio: Basel III pro forma (Sep 11) Excludes future retained 14% earnings (0.5%) 11.6% 12% 1.1% Group (1.2%) capital 11.3% surplus 10% (0.9%) 0.7% 9.9% 9.8% (1.9%) Harmonised Basel III requir
Slide 45: 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 2011 28 October 2011 – Presentation to Investors and Analysts 45
Slide 46: Short term outlook
Short term outlook For personal use only Summarised below are the outlook statements for each operating group, the FY12 results for which will vary with market conditions Net profit contribution FY07- FY11 historical FY07-FY11 FY12 outlook as updated Update to FY12 Operating Group range average FY
Slide 47: Short term outlook
Short term outlook For personal use only As previously foreshadowed, uncertain market conditions make short term forecasting very difficult Since our previous update on 7 September 2011, the capital markets facing businesses continue to experience difficult trading conditions If market conditi
Slide 48: Medium term
Medium term For personal use only Macquarie is well positioned to deliver superior performance in the medium term Continue to adapt our portfolio mix to changing market conditions Annuity-style income is provided by three significant businesses which are delivering superior returns following years
Slide 49: Approximate business Basel III ROE
Approximate business Basel III ROE For personal use only Approx. Basel III Equity Group Annualised FY12 Return Approx. 5 Year Average $Ab on Equity1 Annuity-style businesses (excluding legacy) Approx. Return on Equity1 Macquarie Funds Group 1.5 Corporate and Asset Finance 1.6 23% 20%2 Banking and Fi
Slide 50: Medium term
Medium term For personal use only An improvement in investor confidence should lead to higher allocations to riskier assets, which are generally higher revenue products MFG Annuity-style business that is diversified across regions, products, asset classes and investor types Well positioned for
Slide 51: Appendix A: Additional Information – Funding
For personal use only A Appendix Additional Information – Funding Macquarie Group Limited Result Announcement for the half year ended 30 September 2011 28 October 2011 – Presentation to Investors and Analysts 51
Slide 52: 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 53: 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 54: Funding for the Group September 2011
Funding for the Group 30 September 2011 For personal use only Sep 11 Mar 11 Sep 10 Well diversified funding sources $Ab $Ab $Ab Minimal reliance on short term wholesale funding Funding sources Negotiable certificates of deposit 1.5 1.7 1.4 markets Commercial paper 4.2 3.5 1.0 Net trade creditors
Slide 55: Funding for the Bank Group September 2011
Funding for the Bank Group 30 September 2011 For personal use only Sep 11 Mar 11 Sep 10 Bank balance sheet remains very liquid, well $Ab $Ab $Ab capitalised and with a diversity of funding sources Funding sources Negotiable certificates of deposit 1.5 1.7 1.4 Term funding beyond one year (exclud
Slide 56: Funding for the Non-Bank Group September 2011
Funding for the Non-Bank Group 30 September 2011 For personal use only Sep 11 Mar 11 Sep 10 Non-Bank Group is predominantly term funded $Ab $Ab $Ab Term funding beyond one year (excluding equity) has Funding sources MBL intra-group loan to MGL - 0.7 1.2 a weighted average term to maturity of 4.8
Slide 57: 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 58: Appendix B: Additional Information – Capital
For personal use only B Appendix Additional Information – Capital Macquarie Group Limited Result Announcement for the half year ended 30 September 2011 28 October 2011 – Presentation to Investors and Analysts 58
Slide 59: Macquarie Group regulatory capital: surplus calculation
Macquarie Group regulatory capital Surplus calculation For personal use only Sep 11 $Am Macquarie Group eligible capital: Bank eligible capital 9,221 Non-Bank eligible capital 3,145 Eligible capital 12,366 (a) Macquarie Group capital requirement: Banking Group contribution Risk-weighted assets 57,60
Slide 60: Macquarie Group regulatory capital: Banking Group contribution
Macquarie Group regulatory capital Banking Group contribution For personal use only Risk-weighted Tier 1 Capital 30 September 2011 assets Deductions Requirement1 $Am $Am $Am Credit risk On balance sheet 32,847 2,299 Off balance sheet 10,528 737 Credit risk total 43,375 3,036 Equity risk 2,173 152 Ma
Slide 61: Macquarie Group regulatory capital: Non-Banking Group contribution
Macquarie Group regulatory capital Non-Banking 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)
Slide 62: Macquarie Group regulatory capital: Non-Banking Group contribution
Macquarie Group regulatory capital Non-Banking Group contribution For personal use only Capital Assets Equivalent 30 September 2011 $Ab Requirement Risk Weight $Am Funded assets Cash and liquid assets 2.2 26 15% Loan assets1 0.9 95 137% Assets held for sale 0.1 49 685% Debt investment securities 0.1
Slide 63: Appendix C: Glossary
For personal use only C Appendix Glossary Macquarie Group Limited Result Announcement for the half year ended 30 September 2011 28 October 2011 – Presentation to Investors and Analysts 63
Slide 64: Glossary
Glossary For personal use only $A Australian Dollar CHESS Australian Clearing House and Electronic Sub-Register System $C Canadian Dollar CMA Cash Management Account $US United States Dollar CMT Cash Management Trust € Euro CPS Convertible Preference Shares 1H10 Half Year ended 30 September 2009 CVA
Slide 65: Glossary
Glossary For personal use only G10 Group of Ten Industrialised Nations No. Number GFC Global Financial Crisis NOHC Non-Operating Holding Company HFS Held For Sale NPAT Net Profit After Tax HK Hong Kong NZ New Zealand HR Human Resources Pcp Prior Corresponding Period ILFC International Lease Finance
Slide 66: Macquarie Group Limited
Macquarie Group Limited For personal use only