Slide 1: Result Announcement for the full year ended 31 March 2011
Macquarie Group Limited For personal use only Result Announcement for the full year ended 31 March 2011 Presentation to Investors and Analysts 29 April 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 11. Introduction – Richard Sheppard 2 2. Overview of Result – Nicholas Moore 3. Outlook – Nicholas Moore 4. Result Analysis and Financial Management – Greg Ward 5. Appendices 3
Slide 4: Introduction
For personal use only Introduction Richard Sheppard Deputy Managing Director Macquarie Group Limited Result Announcement for the full year ended 31 March 2011 29 April 2011 – 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 Macquarie Group Limited Result Announcement for the full year ended 31 March 2011 29 April 2011 – Presentation to Investors and Analysts 5
Slide 6: About Macquarie
About Macquarie B ildi ffor th Building the medium di tterm For personal use only Top-tier, global institutional securities house with strong Asia-Pacific foundations Full-service Full service in Australia Australia, Asia Asia, South Africa and Canada with growing offerings in the US and Europe
Slide 7: 2H11 result
2H11 result For personal use only Net profit of $A553m, up 37% on 1H11 Operating income $A4.0b, up 9% on 1H11 As foreshadowed: ⎯ MFG, CAF and BFS continued to see good activity levels throughout 2H11 benefiting from organic growth and a range of recent initiatives ⎯ Improved general market con
Slide 8: FY11 result
FY11 result For personal use only Net profit of $A956m, down 9% on FY10 Operating income $A7.6b, up 15% on FY10 Operating expenses $A6.4b, up 19% on FY10 primarily due to the full year effect of the expanded global platform ⎯ Employment expenses $A3.9b, $A3 9b up 25% on FY10 primarily due to a
Slide 9: Result
Result For personal use only 2H11 1H11 Mar 11 Mar 10 $Am $Am $Am $Am Net operating income 3,983 3,661 7,644 6,638 Total operating expenses (3,208) (3,165) (6,373) (5,344) Operating profit before income tax 775 496 1,271 1,294 Tax expense (197) (85) (282) (201) Operating profit after income tax 578 4
Slide 10: Financial performance
Financial performance For personal use only $Am FY11 Operating income of $A7,644m $Am FY11 Profit of $A956m 2H11 up 9% on 1H11 800 2H11 up 37% on 1H11 4,000 400 2,000 0 0 2H09 1H10 2H10 1H11 2H11 2H09 1H10 2H10 1H11 2H11 $A FY11 EPS of $A2.83 $A FY11 DPS of $A1.86 2.00 2H11 up 37% on 1H11 In line wi
Slide 11: Diversified income
Diversified income O Operating ti income i b by source For personal use only Operating income before writedowns, impairments, equity accounted gains/(losses) i /(l ) and d one-off ff it items 12 months to 31 March 10 12 months to 31 March 11 $A7.0b $A7.6b Institutional and retail cash equities Equit
Slide 12: Diversified by region
Diversified by region International income1 60% of total Total staff over 15,5002; international staff 53% of total For personal use only EUROPE, MIDDLE EAST ASIA AMERICAS & AFRICA3 Income: $A1,009m (14% of total) Income: $A1,150m (16% of total) Income: $A2,229m (30% of total) Staff: 1,613 Staff: 2,
Slide 13: Diversified income by region
Diversified income O Operating ti income i b by region i For personal use only 64% of operating income in 2H11 is generated offshore ⎯ FX translation t l ti estimated ti t d tto h have a negative ti iimpactt off approx. 5% d due tto strengthening t th i 1,800 of AUD by an average of 10% against majo
Slide 14: Global specialist: Asia-Pacific
Global specialist Asia Pacific Asia-Pacific For personal use only Group-wide Extensive client relationships, in-depth knowledge and experience developed over more than 40 years. More than 10,200 10 200 staff across 26 locations locations. Macquarie is a recognised Asia-Pacific specialist. specialist
Slide 15: Global specialist: Commodities
Global specialist Case Study: Commodities Commodities, Agriculture and Resources For personal use only Group-wide Comprehensive platform of agriculture, metals and freight commodities developed over more than 30 years. Expert global mining finance and advisory teams operating worldwide worldwide. M&
Slide 16: Global specialist: Energy
Global specialist Case Study: Energy For personal use only Group-wide Deep industry expertise developed from experience in commodities and resources and enhanced following strategic acquisitions in the Americas. Active trader in energy markets for more than a decade. decade Capabilities in products
Slide 17: Global specialist: Infrastructure and Utilities
Global specialist Case Study: Infrastructure and Utilities For personal use only Group-wide Global pioneer for more than 20 years. Largest infrastructure fund manager globally. More than $A90b in infrastructure assets under management management. M&A and equity capital markets Financing One of the
Slide 18: Assets under management of $A310b
Assets under management of $A310b For personal use only Decrease in AUM due to: ⎯ Impact of CMT transfer into CMA ($A9 ($A9.6b 6b in Jul 10) ⎯ Net fund inflows and equity movements of $A21b, more than offset by decrease due to FX of $A27b $Ab 350 Fixed income Direct infrastructure $A326b Equities
Slide 19: Macquarie Securities
Macquarie Securities Operating income of $A1,299m, down 12% on prior year N t profit Net fit contribution t ib ti off $A175m, $A175 down d 70% on prior i year For personal use only Australia Asia US Europe Activity Activity Activity Activity Cash Market share for FY11 of 9.2% Increased market sh
Slide 20: Macquarie Securities
Macquarie Securities Operating income of $A1,299m, down 12% on prior year N t profit Net fit contribution t ib ti off $A175m, $A175 down d 70% on prior i year For personal use only Canada South Africa Activity y Activity y Platform Growth Cash Market share for FY11 of 1.9% Market share for FY11
Slide 21: Macquarie Capital
Macquarie Capital Operating income of $A1,001m, up 46% on prior year N t profit Net fit contribution t ib ti off $A281m, $A281 up ffrom $A56 $A56m lloss on prior i year For personal use only 547 transactions valued at $A159b1 (448 transactions valued at $A121b prior year) Australia and NZ Asia 83 de
Slide 22: Macquarie Capital
Macquarie Capital Operating income of $A1,001m, up 46% on prior year N t profit Net fit contribution t ib ti off $A281m, $A281 up ffrom $A56 $A56m lloss on prior i year For personal use only 547 transactions valued at $A159b1 (448 transactions valued at $A121b prior year) EMEA Americas 57 deals valu
Slide 23: Macquarie Funds
Macquarie Funds Operating income of $A1,410m, down 2% on prior year N t profit Net fit contribution t ib ti of $A602m, $A602 d i year1 down 26% on prior For personal use only Operating income before gains from listed fund initiatives $A1,301m, up 51% on prior year2 Macquarie Infrastructure and Real
Slide 24: Fixed Income, Currencies and Commodities
Fixed Income, Currencies and Commodities Operating income of $A1,416m, down 2% on prior year N t profit Net fit contribution t ib ti off $A575m, $A575 down d 30% on prior i year For personal use only Fixed Income and US and European Metals Asian Markets Agriculture Energy Foreign Exchange Credit Act
Slide 25: Corporate and Asset Finance
Corporate and Asset Finance Operating income of $A786m, up 69% on prior year N t profit Net fit contribution t ib ti off $A501m, $A501 up 96% on prior i year For personal use only Activity Platform Growth Asset A t and d loan l portfolio tf li off $A17 $A17.3b 3b att FY11 FY11, up 22% on prior i y
Slide 26: Banking and Financial Services
Banking and Financial Services Operating income of $A1,494m, up 19% on prior year N t profit Net fit contribution t ib ti off $A275m, $A275 up 5% on prior i year For personal use only Global client numbers 1.04 million, up 40,000 on prior year Private Wealth/Direct Intermediary Funds Management Depo
Slide 27: 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 $A31.6b at Mar 11 from $A19.6b at Mar 10 ⎯ Retail deposits increased to $26.6b at Mar 11 from $A15.5b at Mar 10, p
Slide 28: Funded balance sheet remains strong
Funded balance sheet remains strong For personal use only Macquarie Group Limited $Ab 31 March 2010 $Ab 30 September 2010 $Ab 31 March 2011 90 90 ST wholesale 90 issued paper (3%) ST wholesale issued paper (6%) 80 80 Other debt1 maturing in 80 Other debt1 maturing in the next 12 mths (8%) the next 1
Slide 29: Dividends
Dividends For personal use only FY11 dividend set at $A1.86, in line with FY10 ~ 67% payout ratio ⎯ 2H11 di dividend id d $A1 $A1.00, 00 up ffrom 1H11 di dividend id d off $A0 $A0.86 86 ⎯ Dividend remains unfranked Dividend policy remains 50 – 60% annual payout ratio Di id d reinvestment Divid
Slide 30: Outlook
For personal use only Outlook Nicholas Moore Managing Director and Chief Executive Officer Macquarie Group Limited Result Announcement for the full year ended 31 March 2011 29 April 2011 – Presentation to Investors and Analysts 30
Slide 31: Short term outlook
Short term outlook For personal use only Market uncertainty makes forecasting difficult 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 FY07-FY11 Operating Group historical range a
Slide 32: Short term outlook
Short term outlook For personal use only Overall, we expect an improved result for FY12 on FY11. However, the FY12 result will be dependent upon market conditions particularly for Macquarie Capital and Macquarie Securities which are assuming better market conditions than FY11 In addition to mark
Slide 33: Medium term outlook
Medium term outlook For personal use only Our businesses are increasingly well positioned to benefit from future growth Global specialist ⎯ Significant expertise in key products in all major markets ⎯ Continued investment in our people and our businesses enables us to expand that expertise globall
Slide 34: Result Analysis and Financial Management
For personal use only Result Analysis and Financial Management Greg Ward Chief Financial Officer Macquarie Group Limited Result Announcement for the full year ended 31 March 2011 29 April 2011 – Presentation to Investors and Analysts 34
Slide 35: Income Statement key drivers
Income Statement key drivers For personal use only 2H11 1H11 Mar 11 Mar 10 Net interest income up 18% on prior year to $A1,275m $Am $ $Am $ $Am $ $Am $ – Growth in lending g and leasing g volumes, including g acquisition q of $A1.0b GMAC portfolio in Apr 10 and the full year impact of the Net inte
Slide 36: Gains/(losses) from writedowns, impairments, equity accounting and one-off items
Gains/(losses) from writedowns, impairments, equity accounting and one one-off off items For personal use only 2H11 1H11 Mar 11 Mar 10 $Am $Am $Am $Am Gains from listed fund initiatives1 14 95 109 539 Equity investment impairments (77) (53) (130) (470) Equity accounted gains/(losses)1 94 85 179 (148
Slide 37: Macquarie Securities
Macquarie Securities R Result lt For personal use only Mar 11 Mar 10 Net trading income down 24% on FY10: $Am $ $Am $ – Challenging g g market conditions Net trading income – Retail and institutional product revenues down on prior year across 366 479 all regions with exception of Europe which bene
Slide 38: Macquarie Capital
Macquarie Capital R Result lt For personal use only Mar 11 Mar 10 Net interest expense up 34% on prior year resulting from higher interest $Am $ $Am $ rates Net interest expense1 (151) (113) Advisory and capital markets activity: 547 deals valued at approx. $A159b (448 deals valued at approx. $A
Slide 39: Macquarie Funds
Macquarie Funds R Result lt For personal use only Mar 11 Mar 10 Base fees up 25% on prior year to $A873m $Am $ $Am $ – Benefittingg from full yyear effect of Delaware Investments which increased AUM by $A151b in Jan 10 Base fees 873 697 – Partially offset by decreases due to listed fund initiative
Slide 40: Assets under management of $A310b
Assets under management of $A310b For personal use only $Ab 335 330 21 0 21.0 325 (26.7) 320 (9.6) 6.7 (6.8) 315 325.7 310 305 309.8 300 Mar 10 CMT / CMA Asset acquisitions Asset disposals Net inf lows and 1 FX (impact of Mar 11 conversion i equity it movements t strengthening t th i AUD) 1. Include
Slide 41: Fixed Income, Currencies and Commodities
Fixed Income, Currencies and Commodities R Result lt For personal use only Mar 11 Mar 10 Commodities trading income down 8% on prior year: $Am $ $Am $ – Challenging g g trading g conditions during g the yyear Commodities1 618 671 – Lower client term hedging activity in some commodities markets For
Slide 42: Corporate and Asset Finance
Corporate and Asset Finance R Result lt For personal use only Mar 11 Mar 10 Net interest income up significantly: $Am $ $Am $ – Loan and finance lease p portfolios increased 12% on the p prior yyear, including the acquisition of $A1.0b GMAC portfolio in Apr 10 Net interest income1 583 382 Fee, com
Slide 43: Banking and Financial Services
Banking and Financial Services R Result lt For personal use only Mar 11 Mar 10 Net interest income growth $Am $ $Am $ – Retail deposits p up p 72% from $A15.5b at Mar 10 to $A26.6b at Mar 11 primarily due to conversion of CMT to CMA in Jul 10 Net interest income1 713 551 – Australian mortgage port
Slide 44: Real Estate Banking
Real Estate Banking R Result lt For personal use only Mar 11 Mar 10 Net interest expense down from $A37m in Mar 10 to $A12m in $Am $ $Am $ Mar 11 due to reduction in investment portfolio Net interest expense1 (12) (37) Base and performance fees down significantly on prior year Base fees 1 30 – F
Slide 45: Expenses
Expenses For personal use only Expenses up 19% on prior year; compensation ratio 47.3% (FY10: 42.9%) ⎯ Employment E l t expenses up 25% on prior i year, average h headcount d t up 17% on prior i year Expense to income ratio 83.4% (FY10: 80.5%) $Am 6,500 , 100 140 6,000 789 5,500 6,373 5,000 Empl
Slide 46: Taxation
Taxation For personal use only FY11 FY10 $Am $Am Net profit before tax 1,271 1,294 Add back: writedowns and impairment charges and equity accounted gains/(losses) 79 854 Net profit before writedowns, impairments, equity accounted gains/(losses) and tax 1,350 2,148 Prima facie tax @ 30% 405 644 Incom
Slide 47: Balance sheet highlights
Balance sheet highlights For personal use only Balance sheet remains solid and conservative ⎯ Term T assets t covered d by b term t funding, f di stable t bl ddeposits it and d equity it ⎯ Surplus funding capacity continues to be deployed Retail deposits continuing to grow, up 72% to $A26.6b at
Slide 48: Well diversified funding sources
Well diversified funding sources For personal use only Term funding (drawn and undrawn1) maturing Diversity of MGL funding sources beyond one year (including equity and hybrids) Wholesale Wh l l iissued d paper $Ab Deposits - corporate & wholesale 20 Equity & hybrids Loan capital Debt Deposits - ret
Slide 49: 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 ⎯ Retail deposits increased to $A26.6b at Mar 11 from $A15.5b at Mar 10, primarily driven by $A9.6b of CMT funds transfe
Slide 50: Growth of loan and lease asset portfolio
Growth of loan and lease asset portfolio1 For personal use only $Ab 38 1.6 (0.8) 36 14 1.4 34 32 4.5 30 28 36.2 Growth in Mortgages 26 Increase in corporate Canada partially Acquisition of GMAC lending portfolio offset ff t by b reduction d ti 29.5 auto lease portfolio and in Australian 24 ILFC airc
Slide 51: Loan and lease asset portfolio quality
Loan and lease asset portfolio quality For personal use only Net carrying Provisions Net carrying Provisions value coverage value coverage Mar 11 Mar 11 Mar 10 Mar 10 Loan category $Ab %1 $Ab %1 Description Mortgages Secured by residential mortgages and supported by mortgage insurance - Australia 2.
Slide 52: Equity investments of $A5.2b
Equity investments of $A5 $A5.2b 2b For personal use only Carrying value Carrying value Mar 11 Mar 10 Category $Am $Am Description Debt investment entities 148 225 Largely relates to holding in Diversified CMBS Investments Inc. Underlying investments are commercial mortgage-backed securities that ar
Slide 53: Consistently strong capital base
Consistently strong capital base For personal use only Well capitalised – surplus over Group’s minimum regulatory capital requirement of $A3.0b Core equity represents 88% of the Group Group’ss capital base Capital increased in FY11 due to PMI issue, net of reductions from the MEREP on-market p
Slide 54: Capital being deployed to support growth
Capital being deployed to support growth For personal use only Group capital of $A12.1b at 31 Mar 11, a $A3.0b buffer of capital in excess of the Group’s minimum egu ato y capital regulatory cap ta requirements equ e e ts Strong Banking Group capital ratios - Tier 1: 10.7% (Core Tier 11: 9.9%);
Slide 55: Basel III and other regulatory changes
Basel III and other regulatory changes For personal use only Some uncertainties remain — Basel has recently undertaken a quantitative impact study (QIS) of changes to credit valuation adjustment (CVA) methodology and the capital requirements for bank exposures to central counterparties – final met
Slide 56: Appendix: Additional Information – Funding
For personal use only Appendix Additional Information – Funding Macquarie Group Limited Result Announcement for the full year ended 31 March 2011 29 April 2011 – Presentation to Investors and Analysts 56
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 funding, MBL provides funding to the Bank Group MGL provides funding predominantly to the Non-B
Slide 58: 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 59: Funding for the Group March 2011
Funding for the Group 31 M March h 2011 For personal use only Mar 11 Mar 10 Well diversified funding sources $Ab $ $Ab $ Minimal reliance on short term wholesale funding Funding sources Negotiable certificates of deposit 1.7 1.9 markets Commercial paper 3.5 3.0 Net trade creditors 0.5 0.4 Depo
Slide 60: Funding for the Bank Group March 2011
Funding for the Bank Group 31 M March h 2011 For personal use only Mar 11 Mar 10 Bank balance sheet remains very liquid, well $Ab $ $Ab $ capitalised p and with a diversity y of funding g sources Funding sources Negotiable certificates of deposit 1.7 1.9 Term funding beyond one year (excluding e
Slide 61: Funding for the Non-Bank Group March 2011
Funding for the Non-Bank Group 31 M March h 2011 For personal use only Mar 11 Mar 10 Non-Bank Group is predominantly term funded $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 4.5 years2 N
Slide 62: 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. counterparties They typically represent b
Slide 63: Appendix: Additional Information – Capital
For personal use only Appendix Additional Information – Capital Macquarie Group Limited Result Announcement for the full year ended 31 March 2011 29 April 2011 – Presentation to Investors and Analysts 63
Slide 64: Macquarie Group regulatory capital: Surplus calculation
Macquarie Group regulatory capital S l calculation Surplus l l ti For personal use only Mar 11 $Am Macquarie Group eligible capital: Banking Group Gross Tier 1 capital 8,519 Non-Bank eligible capital 3,570 Eligible capital 12,089 (a) Macquarie Group capital requirement: Banking Group contribution Ri
Slide 65: Macquarie Group regulatory capital: Banking Group contribution
Macquarie Group regulatory capital B ki G Banking Group contribution t ib ti For personal use only Risk-weighted Tier 1 Capital 31 March 2011 assets Deductions Requirement1 $Am $Am $Am Credit risk On balance sheet 27,935 1,955 Off balance sheet 12,870 901 Credit risk total 40,805 2,856 Equity risk 1
Slide 66: Macquarie Group regulatory capital: Non-Banking Group contribution
Macquarie Group regulatory capital N B ki G Non-Banking Group contribution t ib ti For personal use only APRA has specified a regulatory capital framework for MGL A dollar d ll capital it l surplus l iis produced; d d no capital it l ratio ti calculation l l ti iis specified ifi d APRA has app
Slide 67: Macquarie Group regulatory capital: Non-Banking Group contribution
Macquarie Group regulatory capital N B ki G Non-Banking Group contribution t ib ti For personal use only Capital Assets Equivalent 31 March 2011 $Ab Requirement Risk Ri kWWeight i h $Am Funded assets Cash and liquid assets 2.2 24 14% Loan assets1 2.8 278 124% Assets held for sale 01 0.1 42 648% Debt
Slide 68: Appendix: Glossary
For personal use only Appendix Glossary Macquarie Group Limited Result Announcement for the full year ended 31 March 2011 29 April 2011 – Presentation to Investors and Analysts 68
Slide 69: Glossary
Glossary For personal use only $A Australian Dollar DUET DUET Group $C Canadian Dollar ECAM Economic Capital Adequacy Model $US United States Dollar ECM Equity Capital Markets £ Pound Sterling EMEA Europe, the Middle East and Africa € Euro EPS Earnings Per Share 1H11 Half Year ended 30 September 201
Slide 70: Glossary
Glossary For personal use only IPO Initial Public Offering NZ New Zealand IT&T Information Technology & Telecommunications NZD New Zealand Dollar JV Joint Venture OTC Over the Counter KRW South Korean Won P&L Profit and Loss LNG Liquefied Natural Gas PMI Preferred Membership Interests LVR Loan to Va
Slide 71: Macquarie Group Limited
Macquarie Group Limited For personal use only