Macquarie Group, Ltd. · ASX:MQG
Macquarie — H1 2021 Earnings Presentation
79 slides from Macquarie's earnings presentation, Nov 6, 2020
Slide 1: Presentation to investors and analysts
Presentation to investors and analysts Result announcement for the half year ended 30 September 2020 6 November 2020
Slide 2: Disclaimer
Macquarie I 1H21 result announcement I macquarie.com Disclaimer The material in this presentation has been prepared by Macquarie Group Limited ABN 94 122 169 279 (MGL) and is general background information about Macquarie’s (MGL and its subsidiaries) activities current as at the date of this present
Slide 3: Agenda
Agenda 01 Introduction 02 Overview of Result 03 Result Analysis and Financial Management 04 Outlook 05 Appendices
Slide 4: Introduction
Introduction Sam Dobson Head of Investor Relations
Slide 5: Overview of Result
Overview of Result Shemara Wikramanayake Managing Director and Chief Executive Officer
Slide 6: About Macquarie
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices About Macquarie Annuity-style activities Markets-facing activities Net Profit Contribution ~70% Net Profit Contribution ~30% Macquarie Asset Management Ban
Slide 7: Macquarie's response to COVID-19
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Macquarie’s response to COVID-19 Employees Clients Portfolio Companies Community • Gradual, voluntary return to office commenced • Enhanced client support
Slide 8: 1H21 result: $A985m down 32% on 1H20
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices 1H21 result: $A985m down 32% on 1H20; down 23% on 2H20 1H21 2H20 1H20 1H21 v 1H21 v $Am $Am $Am 1H20 2H20 Net operating income (excl. Credit and Other 5,96
Slide 9: 1H21 net profit contribution from Operating Groups
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices 1H21 net profit contribution from Operating Groups $A2,272m down 21% on 1H20; down 12% on 2H20 ANNUITY-STYLE BUSINESSES MARKETS-FACING BUSINESSES ▼7% ▼42%
Slide 10: Financial performance
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Financial performance Operating income Profit $Am 1H21 OPERATING INCOME $Am 1H21 PROFIT 8,000 2,000 $A5,519m $A985m 6,000 1,500 ▼13 % ▼32 % 4,000 ON 1H20 1
Slide 11: Assets under management of $A556.3b
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Assets under management of $A556.3b1 AUM decreased 7% from $A598.9b1 at 31 Mar 20 Decrease due to impacts from foreign exchange and a reduction in contract
Slide 12: Diversification by region
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Diversification by region International income 68% of total income1 Total staff2 16,356, International staff 57% of total Americas EMEA Asia Australia3 31%
Slide 13: Diversification by region
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Diversification by region 68% of total income1 in 1H21 was generated offshore A 10% movement2 in AUD is estimated to have approximately a 7% impact on NPAT
Slide 14: Macquarie Asset Management
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Macquarie Asset Management MACQUARIE INFRASTRUCTURE MACQUARIE INVESTMENT ▼5% AND REAL ASSETS (MIRA) MANAGEMENT (MIM) OPERATING INCOME ON 1H20 • $A139.8b in
Slide 15: Banking and Financial Services
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Banking and Financial Services PERSONAL BANKING BUSINESS BANKING WEALTH MANAGEMENT ▼4% OPERATING INCOME • Home loan portfolio of $A57.4b, up 10% on • Busin
Slide 16: Commodities and Global Markets
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Commodities and Global Markets SPECIALISED AND ASSET COMMODITY MARKETS 61%1 FINANCIAL MARKETS 24%1 ▼1% FINANCE 15%1 OPERATING INCOME ON 1H20 • Strong perfo
Slide 17: Macquarie Capital
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Macquarie Capital ADVISORY AND CAPITAL SOLUTIONS INFRASTRUCTURE AND ENERGY GROUP ▼46% OPERATING INCOME Summary Summary ON 1H20 • Leading market position in
Slide 18: Funded balance sheet remains strong
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Funded balance sheet remains strong Term liabilities exceed term assets 31 Mar 20 30 Sep 20 $Ab $Ab 180 180 ST wholesale issued paper 3% ST wholesale issue
Slide 19: Basel III capital position
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Basel III capital position • APRA Basel III Group capital at Sep 20 of $A24.6b; Group capital surplus of $A9.4b 1,2 • APRA Basel III CET1 ratio: 13.5%, pro
Slide 20: Business capital requirements
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Business capital requirements1 1H21 KEY DRIVERS $Ab 18.0 $A17.7b MAM 0.1 (0.3) • Decreased requirements primarily due to (0.4) sell-down of Macquarie Europ
Slide 21: Strong regulatory ratios
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Strong regulatory ratios Bank Group (Sep 20) 125.0% 17.5% 16.8% 7.5% 190.0% 6.5% 120.0% 121% 176% 14.0% 6.0% 160.0% 115.0% 13.5% 5.9% 110.0% 10.5% 4.5% 130
Slide 22: Interim dividend
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Interim dividend Interim DPS of $A1.35, represents a 50% payout ratio for 1H21, partially offset by issuance for DRP requirements, consistent with APRA gui
Slide 23: Result Analysis and Financial Management
Result Analysis and Financial Management Alex Harvey Chief Financial Officer
Slide 24: Income statement key drivers
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Income statement key drivers 1H21 2H20 1H20 • Net interest and trading income of $A2,520m, up 4% on 1H20 $Am $Am $Am – Lower net interest and trading expen
Slide 25: Income statement by Operating Group NPC
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Income statement by Operating Group NPC $Am KEY DRIVERS 2,000 • MAM: Decrease due to lower Macquarie AirFinance (MAF) income and lower performance fees, pa
Slide 26: Credit and other impairment charge considerations
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Credit and other impairment charge considerations In assessing Macquarie’s expected credit loss provisioning on the loan portfolio, current and expected ma
Slide 27: Credit and Other impairment charges
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Credit and Other impairment charges $Am KEY DRIVERS 500 Credit and Other impairment charges in 1H21 reflect the ongoing impact of COVID-19 on our clients a
Slide 28: Macquarie Asset Management
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Macquarie Asset Management Decrease due to lower Macquarie AirFinance (MAF) income and lower performance fees, partially offset by gain on sale of Macquari
Slide 29: MAM AUM movement
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices MAM AUM movement Decrease due to impacts from foreign exchange and a reduction in contractual insurance assets, partially offset by MIM market movements an
Slide 30: MIRA EUM movement
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices MIRA EUM movement Decrease of 6% primarily due to impacts from foreign exchange partially offset by continued capital raisings $Ab 170 0.7 160 (4.4) 8.9 15
Slide 31: Banking and Financial Services
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Banking and Financial Services Margin compression on deposits and increased credit impairment charges, partially offset by strong home loan growth and depo
Slide 32: Banking and Financial Services
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Banking and Financial Services Strong growth across home loans, deposits and funds on platform $Ab $Ab 100 18 90 16 89.3 16.0 80 86.0 15.2 82.5 14 79.1 74.
Slide 33: Banking and Financial Services
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Banking and Financial Services Portfolio and credit overview Portfolio dynamic 30-Sep-20 31-Mar-20 % change Home Loan Dynamic LVR Distribution 1% 2% Gross
Slide 34: Commodities and Global Markets
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Commodities and Global Markets Result reflective of two distinct quarters: 1Q21 characterised by dislocated markets and elevated volatility. 2Q21 activity
Slide 35: Commodities and Global Markets
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Commodities and Global Markets Strong underlying client base Client numbers1 Specialised and Asset Finance portfolio2 $Ab 1,600 10.0 1,400 1,334 8.0 8.4 1,
Slide 36: Macquarie Capital
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Macquarie Capital Result driven by lower investment-related income, lower fee and commission income and higher credit and other impairment charges partiall
Slide 37: Macquarie Capital
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Macquarie Capital Movement in regulatory capital $Ab 5.0 0.3 (0.8) 4.5 4.3 4.0 (0.4) 3.4 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 31-Mar-20 Investments Realisations
Slide 38: Costs of compliance
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Costs of compliance Total compliance spend1 approximately $A300m in 1H21, up 12% on 1H20 1H21 2H20 1H20 • The industry continues to see an increase in regu
Slide 39: Balance sheet highlights
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Balance sheet highlights • Balance sheet remains solid and conservative – Term assets covered by term funding, stable deposits and equity – Minimal relianc
Slide 40: Diversified issuance strategy
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Diversified issuance strategy Term funding as at 30 Sep 20 – diversified by currency1, tenor2 and type Currency Tenor Type • Well-diversified issuance and
Slide 41: Continued customer deposit growth
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Continued customer deposit growth Macquarie has seen continued success in its long-term strategy of diversifying funding sources by growing its deposit bas
Slide 42: Loan and lease portfolios – funded balance sheet
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Loan and lease portfolios1 – funded balance sheet Sep 20 Mar 20 Operating Group Category $Ab $Ab Description Home loans2 48.8 43.2 Secured by Australian re
Slide 43: Equity investments of $A6.5b
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Equity investments of $A6.5b1 Carrying value2 Carrying value2 Sep 20 Mar 20 Category $Ab $Ab Description Macquarie Asset Management (MIRA) managed funds 1.
Slide 44: Regulatory update
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Regulatory update Australia • On 30 Mar 20, APRA announced the deferral of its scheduled implementation of the Basel III reforms in Australia by one year 1
Slide 45: Regulatory update
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Regulatory update Germany • Macquarie continues to respond to requests for information about its historical activities as part of the ongoing, industry-wid
Slide 46: Bank Group Basel III Common Equity Tier 1 (CET1) Ratio
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Bank Group Basel III Common Equity Tier 1 (CET1) Ratio • APRA Basel III CET1 ratio: 13.5%, pro forma 12.5%1,2,3 • Harmonised Basel III CET1 ratio: 16.8%4 B
Slide 47: Strong liquidity position maintained
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Strong liquidity position maintained • 176% average LCR for Sep 20 quarter, based on daily observations – Maintained well above regulatory minimum – Includ
Slide 48: Capital management update
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Capital management update Additional Tier 1 Capital • On 2 Jun 20, MBL issued 6,410,270 Macquarie Bank Capital Notes 2 (BCN2) at an issue price of $A100 ea
Slide 49: Outlook
Outlook Shemara Wikramanayake Managing Director and Chief Executive Officer
Slide 50: Factors impacting short-term outlook
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Factors impacting short-term outlook Annuity-style businesses Markets-facing businesses Non-Banking Group Macquarie Asset Management (MAM) Macquarie Capita
Slide 51: Short-term outlook
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Short-term outlook Market conditions are likely to remain challenging, especially given the significant and unprecedented uncertainty caused by the worldwi
Slide 52: Medium-term outlook
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Medium-term outlook Macquarie remains well-positioned to deliver superior performance in the medium term Deep expertise in major markets Build on our stren
Slide 53: Medium term
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Medium term Annuity-style businesses Markets-facing businesses Non-Banking Group Macquarie Asset Management (MAM) Macquarie Capital1 (MacCap) Non-Banking G
Slide 54: Approximate business Basel III Capital and ROE
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Approximate business Basel III Capital and ROE 30 Sep 20 APRA Basel III Capital1 Approx. 1H21 Return on Approx. 14-year Average Return Operating Group @ 8.
Slide 55: Presentation to investors and analysts
Presentation to investors and analysts Result announcement for the half year ended 30 September 2020 6 November 2020
Slide 56: Appendix A
Appendix A Detailed Result Commentary
Slide 57: Macquarie Asset Management
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Macquarie Asset Management Result 1H21 2H20 1H20 • Base fees of $A971m, up on 1H20 including $Am $Am $Am – Contributions from MIM as a result of additional
Slide 58: Banking and Financial Services
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Banking and Financial Services Result 1H21 2H20 1H20 • Net interest and trading income of $A844m, up 1% on 1H20 $Am $Am $Am – 32% growth in the average BFS
Slide 59: Commodities and Global Markets
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Commodities and Global Markets Result 1H21 2H20 1H20 • Commodities income of $A1,112m, up 6% on 1H20; $Am $Am $Am – Risk management products down 9% on a s
Slide 60: Macquarie Capital
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Macquarie Capital Result 1H21 2H20 1H20 • Fee and commission income of $A665m, down 10% on 1H20 due to lower mergers and acquisitions $Am $Am $Am fee incom
Slide 61: Appendix B
Appendix B Additional information – Funding
Slide 62: Macquarie funding structure
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Macquarie funding structure • MGL and MBL are Macquarie’s two primary external funding vehicles which have separate and distinct funding, capital and liqui
Slide 63: Funded balance sheet reconciliation
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Funded balance sheet reconciliation • Macquarie’s statement of financial position is prepared in accordance with Australian accounting standards which do n
Slide 64: Funding for Macquarie
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Funding for Macquarie Sep 20 Mar 20 Sep 191 $Ab $Ab $Ab • Well diversified funding sources Funding sources • Minimal reliance on short-term wholesale fundi
Slide 65: Funding for the Bank Group
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Funding for the Bank Group Sep 20 Mar 20 Sep 191 $Ab $Ab $Ab • Bank balance sheet remains liquid and well capitalised, with a diverse Funding sources range
Slide 66: Funding for the Non-Bank Group
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Funding for the Non-Bank Group Sep 20 Mar 20 Sep 19 $Ab $Ab $Ab • Non-Bank Group is predominantly term funded Funding sources • Term funding beyond one yea
Slide 67: Explanation of funded balance sheet reconciling items
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Explanation of funded balance sheet reconciling items • Self-funded trading assets: Macquarie enters into stock borrowing and lending as well as repurchase
Slide 68: Conservative long standing liquidity risk management framework
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Conservative long standing liquidity risk management framework Liquidity Policy • The key requirement of the MGL and MBL liquidity policies is that the ent
Slide 69: Appendix C
Appendix C Additional information – Capital
Slide 70: Macquarie Basel III regulatory capital
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Macquarie Basel III regulatory capital Surplus calculation Harmonised APRA Basel III Basel III 30 Sep 20 $Am $Am Macquarie eligible capital Bank Group Gros
Slide 71: Macquarie APRA Basel III regulatory capital
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Macquarie APRA Basel III regulatory capital Bank Group contribution Risk-weighted assets Tier 1 Deductions Capital Requirement1 30 Sep 20 $Am $Am $Am Credi
Slide 72: Macquarie regulatory capital
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Macquarie regulatory capital Non-Bank Group contribution • APRA has specified a regulatory capital framework for Macquarie • A dollar capital surplus is pr
Slide 73: Macquarie regulatory capital
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Macquarie regulatory capital Non-Bank Group contribution Capital Assets Requirement Equivalent Risk 30 Sep 20 $Ab $Am Weight Funded assets Cash and liquid
Slide 74: Appendix D
Appendix D Additional information – ECL key indicators
Slide 75: Expected Credit Loss – key indicators
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Expected Credit Loss – key indicators • Under the AASB 9 credit impairment model, losses are recognised on an Expected Credit Loss (ECL) basis. ECLs are re
Slide 76: Appendix E
Appendix E Glossary
Slide 77: Glossary
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Glossary $A / AUD Australian Dollar CLF Committed Liquid Facility $US / USD United States Dollar CMA Cash Management Account £ / GBP Pound Sterling CRM Cus
Slide 78: Glossary
Macquarie I 1H21 result announcement I macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices Glossary IPO Initial Public Offering MIRA Macquarie Infrastructure and Real Assets IRB Internal Ratings-Based MW Mega Watt IFRS International Financial Rep
Slide 79: Presentation to investors and analysts
Presentation to investors and analysts Result announcement for the half year ended 30 September 2020 6 November 2020