Macquarie Group Limited

Transcription

1 Macquarie Group Limited Presentation to Debt Investors April 2019

2 Disclaimer The material in this presentation has been prepared by Macquarie Group Limited ABN (MGL) and is general background information about MGL and its subsidiaries (Macquarie) activities current as at the date of this presentation. This information is given in summary form and does not purport to be complete. The material contained in this presentation may include information derived from publicly available sources that have not been independently verified. Information in this presentation should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities or other financial products or instruments and does not take into account your particular investment objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information having regard to these matters, any relevant offer document and in particular, you should seek independent financial advice. No representation or warranty is made as to the accuracy, completeness or reliability of the information. All securities and financial product or instrument transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk. This presentation may contain forward looking statements that is, statements related to future, not past, events or other matters including, without limitation, statements regarding our intent, belief or current expectations with respect to Macquarie s businesses and operations, market conditions, results of operation and financial condition, capital adequacy, provisions for impairments and risk management practices. Readers are cautioned not to place undue reliance on these forward looking statements. Macquarie does not undertake any obligation to publicly release the result of any revisions to these forward looking statements or to otherwise update any forward looking statements, whether as a result of new information, future events or otherwise, after the date of this presentation. Actual results may vary in a materially positive or negative manner. Forward looking statements and hypothetical examples are subject to uncertainty and contingencies outside Macquarie s control. Past performance is not a reliable indication of future performance. Unless otherwise specified all information is at 30 September Certain financial information in this presentation is prepared on a different basis to the Financial Report within the Macquarie Group Annual Report ( the Financial Report ) for the half year ended 30 September 2018, which is prepared in accordance with Australian Accounting Standards. Where financial information presented within this presentation does not comply with Australian Accounting Standards, a reconciliation to the statutory information is provided. This presentation provides further detail in relation to key elements of Macquarie s financial performance and financial position. It also provides an analysis of the funding profile of Macquarie because maintaining the structural integrity of Macquarie s balance sheet requires active management of both asset and liability portfolios. Active management of the funded balance sheet enables Macquarie to strengthen its liquidity and funding position. Any additional financial information in this presentation which is not included in the Financial Report was not subject to independent audit or review by PricewaterhouseCoopers. The material in this presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States. Any securities of MGL or its subsidiaries to be offered and sold have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended ( U.S. Securities Act ), or the securities laws of any state or other jurisdiction of the United States. Accordingly, any such securities may not be offered or sold, directly or indirectly, unless they have been registered under the U.S. Securities Act or are offered and sold pursuant to an exemption from, or in a transaction not subject to, such registration requirements. This document is not investment advice and does not constitute investment research as defined in article 36(1) of Commission Delegated Regulation 2017/565 supplementing Directive 2014/65/EU, as amended. It has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. 2

3 Agenda 1 Overview 2 MGL results for the half year ended 30 September Q19 Overview 4 FY19 Outlook 5 Capital and funding 6 Appendices MACQUARIE 2018

4 01 Overview Presentation to Debt Investors April 2019 MACQUARIE 2018

5 Macquarie overview Diversified financial group providing clients with asset management and finance, banking, advisory and risk and capital solutions across debt, equity and commodities Macquarie Group overview 1 Global locations Annuity-style businesses approx. 70% Macquarie Asset Management Corporate and Asset Finance CAF 24% MAM 33% Macquarie Group BFS 11% Capital markets facing businesses approx. 30% CGM 18% MacCap 14% Commodities and Global Markets Macquarie Capital North America 20 locations Latin America 3 locations Europe 13 locations Middle East 2 locations Africa 2 locations Asia 14 locations Australia 10 locations New Zealand 1 location Banking and Financial Services 1H19 net profit $A1,310m FY18 net profit $A2,557m $A551.0b assets under management as at 30 Sep 18 MBL A/A2/A credit rating APRA primary regulator for MBL & MGL 15,110 employees, operating in over 25 countries Employees and global locations as at 31 Dec Pie chart is based on FY18 net profit contribution from operating groups. Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. 5

6 $Am $Am $Am 49 years of profitability Hill Samuel UK opens branch office in Sydney Recession Currency Crisis US banks capital losses Global debt crisis US recession Savings and loan crisis $A floated MBL established First listed property trust Enter stockbroking Stock market crash London office opens Recession Global real estate crash Hills Motorway Mortgage securitisation ,000 2,500 2,000 1,500 1,000 MBL listed Asian Russian Financial Debt Crisis Crisis BT Australia acquired Dot Com crash 9/11 US Recession Sydney Airport SARS ING Acquired Orion Securities CIT Systems Leasing Group Restructure Significant Market Disruption Thames Water Giuliani Capital GFC Constellation Tristone Delaware FPK Blackmont Sal Opp. ILFC GMAC Presidio Innovest REGAL European rail leasing Onstream AWAS aircraft operating lease GE Capital s portfolio Esanda Premium portfolio Funding business UK GIB & Cargill H19 6

7 Macquarie funding structure 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 Group Non-Bank Group Debt and Hybrid Equity Macquarie Group Limited (MGL) Equity Debt and Equity Debt and Equity Debt and Hybrid Equity Macquarie Bank Limited (MBL) Bank Group Non-Bank Subsidiaries 7

8 Macquarie Asset Management Actively manages money for investors across multiple asset classes 1 33% Equities Energy Net profit contribution FY18 $A1,685 million 2 29% 1H19 $A762 million Fixed income Agriculture Infrastructure Multi-asset 10% on FY17 36% on 1H18 Real Estate Specialist investments MIRA AUM $A178.9b 3 MIM AUM $A363.6b 3 MSIS 4 AUM $A7.0b 3 No.1 infrastructure manager globally Grew equity under management to $A105.8b 23% on Mar 18 Invested over $A6.6b of equity $A16.0b of equity to deploy 3 $A363.6b in assets under management Acquired ValueInvest Asset Management S.A. 9% on Mar 18 70% of key strategies outperform over 1 year 5 Received two Lipper awards and one Euro Funds award 6 Closed 10 third party investor commitments bringing total commitments on MIDIS platform to $A9.6b Largest specialist infrastructure debt manager 7 $A549.5 billion assets under management 3 11% on Mar Based on FY18 net profit contribution from operating groups. 2. Based on 1H19 net profit contribution from operating groups 3. As at 30 Sep As announced on 2 Nov 2018, MSIS would move from MAM to CAF effective 1 Dec 2018 while its fiduciary businesses, such as the infrastructure debt business (MIDIS) will move to MAM in the non-banking group on receipt of the required approvals 5. As at 31 Mar 18, 70% of MIM s key global strategies were outperforming their respective benchmarks on a 1-year basis 6. For more information and disclosures about these awards, visit: 7. PDI Top 50,

9 Corporate and Asset Finance Finances the assets people use every day 1 24% Net profit contribution FY18 $A1,206 million 2 17% 1H19 $A437 million Vehicles Aviation Energy 1% on FY17 29% on 1H18 Technology $A16.1 billion 3 Vehicles portfolio owned planes 8 Leading Australian $A8.2 billion 3 vehicle financier Aviation portfolio 600, 000+ cars 9 million+ smart meters in the UK Vehicles 4 Aircraft 6 Leading global aircraft lessor $A37 billion+ invested across more than 570 Principal Finance deals in 9 years 5 Principal Finance 6 TMT 7 Portfolio $A16.1b Portfolio $A8.2b Portfolio $A4.1b Portfolio $A2.7b Mining equipment Healthcare Multi-family Infrastructure Energy Rail Resources Portfolio $A1.4b Portfolio $A0.7b Portfolio $A0.5b $A33.7 billion Asset and loan portfolio 3 2% on Mar Based on FY18 net profit contribution from operating groups. 2. Based on 1H19 net profit contribution from operating groups 3. As at 30 Sep Vehicles portfolio includes General Plant and Equipment. As announced on 2 Nov 2018, Macquarie Vehicle Leasing would move from CAF to BFS effective 1 Dec As at 31 Mar The Aircraft and Principal Finance business moved from the bank to the non-bank effective 10 Dec Telecoms, media and technology 8. Including orders 9

10 Banking and Financial Services A technology-driven Australian retail bank and wealth manager 1 11% Home loans Personal banking Credit cards Bank accounts Net profit contribution FY18 $A560 million 2 11% 1H19 $A296 million Wealth management Investments Financial advice Wrap More than 1 million Australian clients 9% on FY17 3% on 1H18 Business banking Property services Professional services Award winning digital banking offering 3 Australia s 1 st open banking platform gives customers control over their data Canstar 5 star rating for outstanding value Credit card Transaction Account 4 $A88.1 billion Funds on platform 5 $A49.4 billion total deposits 6 $A36.1 billion home loans years bringing innovation and competition to Australian consumers 1. Based on FY18 net profit contribution from operating groups. 2. Based on 1H19 net profit contribution from operating groups. 3. Best Digital Banking Offering & Most Innovative Card Offering at 2017 Australian Retail Banking awards / Winner in the 2018 Mozo Experts Choice Awards in the Travel Money/ International Money Transfer category. 4. Canstar 5-Star Rating for Outstanding Value Transaction Account High transactor and low transactor profiles 5. As at 30 Sep Funds on platform includes Macquarie Wrap and Vision. 6. As at 30 Sep BFS deposits exclude corporate/wholesale deposits. 7. As at 30 Sep

11 Commodities and Global Markets Provides clients with access to markets, financing, hedging, research and market analysis, and physical execution 1 18% 30+ years in metals, equities, futures and FX markets Net profit contribution FY18 $A910 million 2 27% 1H19 $A700 million 20+ years in agricultural markets 15 6% on FY17 85% on 1H18 years in energy markets No.2 US physical gas marketer in North America 3 Differentiated insights on 2,000+ stocks globally Integrated end-to-end offering across global markets, including equities, fixed income, foreign exchange and commodities Derivatives House of the Year 4 Energy 50+ Direct access equity exchanges and liquidity venues No.1 Futures broker on the ASX 5 No.2 in Australian and New Zealand ECM 6 Market trading across 160+ products in 25+ market segments 1. Based on FY18 net profit contribution from operating groups. 2. Based on 1H19 net profit contribution from operating groups. 3. Platts 1Q CY Energy Risk Awards. 5. Based on overall market share on ASX24 Futures volumes YTD as at 30 Sep Thomson Reuters 11

12 Macquarie Capital Advises and invests alongside clients and partners to realise opportunity 1 14% Net profit contribution FY18 $A700 million 2 16% 1H19 $A406 million 45% on FY17 114% on 1H18 No.1 global infrastructure finance adviser 3 No.1 completed M&A deals in ANZ 4 Global leader in green energy 60+ green energy projects under development or construction 7 Energy Telecommunications, media and entertainment Infrastructure and utilities Resources Real estate Industrials Technology Financial institutions Most Innovative Investment Bank for Infrastructure and Project Finance 5 Australian Renewable Energy Deal of the Year Wind Coopers Gap Wind Farm 6 Project & Infrastructure Finance Award Best Project Sponsor 8 Project & Infrastructure Finance Award Best Power Financing Norte III 8 $A267 billion Value of transactions in 1H Based on FY18 net profit contribution from operating groups. 2. Based on 1H19 net profit contribution from operating groups. 3. Inframation (CY18, by volume). 4. Dealogic (CY18, by volume). 5. The Banker (2018). 6. The Asset (2018). 7. At 30 September LatinFinance (2018). 9. Dealogic and IJGlobal for Macquarie Group completed M&A, balance sheet positions, ECM and DCM transactions converted as at the relevant report date. Deal values reflect the full transaction value and not an attributed value. 12

13 Long standing conservative risk management framework 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 the business level Business heads responsible for identifying risks within their businesses and ensuring these are managed appropriately. Seek a clear analysis of the risks before taking decisions. Understanding worst-case outcomes Risk management approach based on examining the consequences of worst case outcomes and determining whether risks can be tolerated. Adopted for all material risk types and often achieved by stress testing. Requirement for independent sign-off by Risk Management Risk Management Group (RMG) signs off all material risk acceptance decisions. For material proposals, RMG opinion is sought at an early stage in the decisionmaking process. The approval document submitted to senior management includes independent input from RMG on risk and return. Macquarie s approach to risk is supported by the Risk Management Group Macquarie determines aggregate risk appetite by assessing risk relative to earnings, with allowance made for the loss-absorbing ability of the current regulatory capital surplus 13

14 Trading business are client driven Consistent profits and low volatility of returns Days Daily Trading Profit and Loss FY14 FY18 $Am 14

15 Multiple to Macquarie Multiple to Macquarie Stable earnings 5 year earnings volatility relative to Macquarie (since GFC) 10 year earnings volatility relative to Macquarie (includes GFC) x x 16.5x x 1.3x 1.0x 0.7x x 2.3x 1.4x 1.0x 0.6x - Global Investment Banks Global Banks Global Fund/Asset Managers Domestic Asset Managers Macquarie Domestic Majors - Global Investment Banks Global Fund/Asset Managers Global Banks Domestic Asset Managers Macquarie Domestic Majors This page compares the historical earnings volatility among certain firms, and is not intended to represent that Macquarie has a comparable business model, risks or prospects to any other firm mentioned. Volatility of P&L is defined as standard deviation of P&L divided by average P&L (coefficient of variation), based on most recent annual disclosures. Source: Bloomberg as at 21 Nov

16 MGL results for the half year ended 30 September Presentation to Debt Investors April 2019 MACQUARIE 2018

17 1H19 result: $A1,310m up 5% on 1H18; in line with 2H18 1H19 $Am 2H18 $Am 1H18 $Am 1H19 v 1H18 1H19 v 2H18 Net operating income 1 5,830 5,523 5,397 8% 6% Total operating expenses 1 (4,125) (3,763) (3,693) 12% 10% Operating profit before income tax 1,705 1,760 1,704 3% Income tax expense (374) (435) (448) 17% 14% Effective tax rate 2 (%) (Profit)/loss attributable to non-controlling interests (21) (16) (8) Profit attributable to MGL shareholders 1,310 1,309 1,248 5% Annualised return on equity (%) % 4% Basic earnings per share $A3.88 $A3.88 $A3.70 5% Ordinary dividends per share $A2.15 $A3.20 $A2.05 5% 33% 1. Impact in 1H19 from AASB 15 Revenue from Contracts with Customers of $A141m. 2. Calculation of the effective tax rate is after adjusting for the impact of non-controlling interests. 17

18 1H19 net profit contribution from operating groups $A2,601m down 2% on 1H18; up 8% on 2H18 ANNUITY-STYLE BUSINESSES $A1,495m 29% ON 1H18 10% ON 2H18 CAPITAL MARKETS FACING BUSINESSES 95% ON 1H18 6% ON 2H18 $A1,106m MAM: on 1H18 Continued to perform well against a strong 1H18 which benefited from higher performance fees and investmentrelated income. Base fee income was higher in 1H19 due to increased AUM and EUM CGM: on 1H18 Strong contribution from the commodities platform driven by increased client activity and improved trading opportunities, partially offset by higher expenses reflecting increased trading activity, average headcount and technology investment CAF: on 1H18 Asset Finance broadly in line with 1H18; Principal Finance income lower due to early repayments, realisations and investment-related income and lower portfolio volumes BFS: on 1H18 Growth in total BFS deposits, Australian loan portfolio and funds on platform; partially offset by entire period effect of Bank Levy relative to 1H18 and increased costs associated with investment in technology and headcount in key areas to support business growth Note: Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. Pie chart is based on 1H19 net profit contribution from operating groups. Macquarie Capital: on 1H18 Higher investment-related income due to asset realisations and reclassifications and increased fee revenue across M&A, DCM and ECM 18

19 Financial performance Operating income $Am $A5,830m 1H19 OPERATING INCOME 8 % ON 1H18 6 % ON 2H18 Profit $Am $A1,310m 1H19 PROFIT 5 % ON 1H18 FLAT ON 2H18 EPS $A3.88 $A 1H19 EPS $A 5 % ON 1H18 FLAT ON 2H18 DPS $A2.15 1H19 DPS 5 % ON 1H18 33 % ON 2H18 19

20 Diversification by region International income 67% of total income 1 Total staff 15,110; International staff 56% of total Americas 31% of total income Staff 2,758 Income $A1,777m Assets under management $A283.5b employing 22,000+ people 3 CANADA Calgary Montreal Toronto Vancouver LATIN AMERICA Mexico City Sao Paulo Santiago USA Austin Boca Raton Boston Chicago Denver Houston Jacksonville Los Angeles Minneapolis Nashville New York Orlando Philadelphia San Diego San Francisco San Jose EMEA 27% of total income Staff 2,019 Income $A1,545m Assets under management $A112.1b employing 48,000+ people 3 EUROPE Amsterdam Dublin Edinburgh Frankfurt Geneva London Luxembourg Madrid Munich Paris Reading Vienna Zurich MIDDLE EAST Abu Dhabi Dubai SOUTH AFRICA Cape Town Johannesburg Australia 2 33% of total income Staff 6,703 Income $A1,883m Assets under management $A100.2b employing 9,000+ people 3 AUSTRALIA Adelaide Brisbane Canberra Gold Coast Manly Melbourne Newcastle Parramatta Perth Sydney NEW ZEALAND Auckland 1. Net operating income excluding earnings on capital and other corporate items as at 30 Sep Includes New Zealand. 3. Includes staff employed at MIRA-managed fund assets and assets MacCap has invested in as at 31 Dec Asia 9% of total income Staff 3,630 Income $A532m Assets under management $A55.2b employing 48,000+ people 3 ASIA Bangkok Beijing Gurugram Hong Kong Hsin-Chu Jakarta Kuala Lumpur Manila Mumbai Seoul Shanghai Singapore Taipei Tokyo 20

21 03 3Q19 Overview Presentation to Debt Investors April 2019 MACQUARIE 2018

22 3Q19 Overview Satisfactory trading conditions with significant realisations in 3Q19 across the Group Macquarie s annuity-style businesses (MAM, CAF and BFS) combined 3Q19 net profit contribution 1 slightly up on pcp (3Q18) FY19 YTD 2 net profit contribution 1 down on FY18 YTD 2 mainly due to: lower performance fees in MAM; offset by timing of transactions in CAF Principal Finance; and continued growth in BFS Macquarie s markets-facing businesses (CGM and MacCap) combined 3Q19 net profit contribution 1 significantly up on pcp FY19 YTD 2 net profit contribution 1 significantly up on FY18 YTD 2 primarily due to: higher principal revenue in MacCap; and the strong performance of the commodities platform in CGM 1. Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. 2. YTD refers to the nine months to 31 Dec for the relevant year. 22

23 3Q19 Overview Annuity-style businesses Macquarie Asset Management Corporate and Asset Finance Banking and Financial Services 29 % 17% 11% 1H19 contribution 1 AUM of $A532.1b 2 at Dec 18, down 2% on Sep 18 predominately driven by market movements MIRA: $A116.8b in EUM 3, up 10% on Sep 18; $A8.7b in new equity raised in 3Q19 including $A7.4b in Europe; $A1.0b of equity invested; $A1.2b of asset divestments; and $A24.3b of equity to deploy at Dec 18 MIRA: Appointed as investment manager of The Infrastructure Fund (TIF), a $A2.5b unlisted infrastructure fund in Australia MIM: $A346.2b in AUM, down 5% on Sep 18, predominately driven by market movements and net flows; awarded $A8.4b 4 in new, funded institutional mandates and contributions 1H19 contribution 1 1H19 contribution 1 Asset Finance and Principal Finance portfolio of $A21.6b at Dec 18, broadly in line with Sep 18 Asset Finance originations in line with expectations Notable transactions include Asset Finance being awarded the next two years of funding for the rollout of second generation smart meters in the UK for one of the largest energy suppliers following a competitive tender process Principal Finance portfolio additions of $A0.6b in 3Q19 Notable transactions include completion of Principal Finance's acquisition of a 50% interest in a leading UK car park management and solutions company, and completion of the acquisition of a 50% interest in a portfolio of multifamily rental properties and development pipeline in the US Notable realisations included the sale of Principal Finance s majority stake in Energetics, a leading UK multi-utility network provider, to a European infrastructure investor MIDIS total third party investor commitments increased to $A11.0b; closed a number of investments bringing total AUM to $A7.8b 5 Total BFS deposits 6 of $A51.0b at Dec 18, up 3% on Sep 18 Australian mortgage portfolio of $A37.3b at Dec 18, up 3% on Sep 18 Funds on platform 7 of $A82.6b at Dec 18, down 6% on Sep 18, mainly due to market movements Business banking loan portfolio of $A8.1b at Dec 18, up 4% on Sep 18 Australian vehicle asset finance portfolio 8 of $A15.3b at Dec 18, down 1% on Sep Based on 1H19 net profit contribution from operating groups as reported on 2 Nov 18 and has not been restated for business reorganisations affecting MAM, CAF and BFS that occurred during Dec Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. 2. Compared to $A542.5b restated as at 30 Sep MIRA s total EUM includes market capitalisation at measurement date for listed funds, the sum of original committed capital less capital subsequently returned for unlisted funds and mandates as well as invested capital for managed businesses. 4. For the nine months to 31 Dec MIDIS AUM includes undrawn commitments of $A0.6b. 6. BFS deposits exclude corporate/wholesale deposits. 7. Funds on platform includes Macquarie Wrap and Vision. 8. Portfolio moved from CAF Asset Finance to BFS effective 1 Dec

24 3Q19 Overview Markets-facing businesses Commodities and Global Markets Macquarie Capital 27 % 16% 1H19 contribution 1 Strong performance continued in North American Gas and Power, albeit with fewer opportunities from storage and management of transport positions in the latter part of the quarter Maintained ranking as No.2 physical gas marketer in North America 2 Continued strong performance in Fixed Income & Currencies with increased client activity in structured FX in EMEA and Asia-Pacific Cash Equities impacted by challenging market conditions Improved results across the Futures platform driven by increased client activity and volumes 1H19 contribution 1 78 transactions valued at $A155b 3 completed globally, up on pcp and prior period (by value), driven primarily by advisory activity in Europe, Australia and Americas, however Americas DCM activity down on a strong 2Q19 Financial adviser to members of the supervisory board of Linde AG on its combined enterprise value of ~ 80b merger with Praxair, Inc Financial adviser to Wesfarmers Limited in relation to the ~$A19b demerger of Coles Group Limited, the largest spin off in ASX history 4 Financial adviser to KKR on its acquisition of BMC Software and joint bookrunner and joint lead arranger on the $US6.6b financing to support the acquisition Realisation of Macquarie s 21.8% interest in Quadrant Energy through the sale of 100% of the business to Santos Limited for $US2.2b, plus the realisation of Macquarie s 23.9% interest in PEXA, through a trade sale process valuing 100% of the business at $A1.6b Green Investment Group alongside Covanta invested in a 50% stake in Earls Gate Energy Centre, a waste to energy plant to be constructed in Scotland Green energy realisations included Markbygden ETT (Swedish onshore wind), Westermost Rough (UK offshore wind) and Lincs (UK offshore wind) No. 1 in ANZ for completed M&A 5 and No. 2 in ANZ for ECM deals 6 No. 1 Global Infrastructure Financial Advisor 7 and No. 1 US LBO Loans Bookrunner Software & Services 8 1. Based on 1H19 net profit contribution from operating groups. Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. 2. Platts Q3 CY Dealogic and IJGlobal for Macquarie Group 3Q19 completed M&A, principal investments, ECM and DCM transactions, converted at 31 Dec 18 FX rate. Deal values reflect the full transaction value and not an attributed value. 4. Refinitiv (1 Apr Jan 19, by spin off ). 5. Dealogic CY18 (by volume). 6. Dealogic CY18 (by value). 7. Inframation CY18 (by volume and value). 8. Bloomberg CY18. 24

25 04 FY19 Outlook Presentation to Debt Investors April 2019 MACQUARIE 2018

26 Factors impacting short-term outlook Annuity-style businesses Macquarie Asset Management (MAM) Base fees expected to be up, benefiting from strong capital raising and deployment in MIRA and platform acquisitions Performance fees and investment-related income (net of impairments) expected to be down Corporate and Asset Finance (CAF) Asset Finance portfolio broadly in line Timing and level of early prepayments and realisations in Principal Finance Reduced loan volumes in Principal Finance Banking and Financial Services (BFS) Higher deposit, loan portfolio and platform volumes NIM pressure due to higher costs and competitive pressures 1H19 Net profit contribution Markets-facing businesses Commodities and Global Markets (CGM) Strong customer base expected to drive consistent flow across Commodities, Fixed Income, Foreign Exchange and Futures Business benefited from strong market conditions in 1H19 Macquarie Capital (MacCap) Assume market conditions broadly consistent with 1H19 Fewer investment realisations expected given strong first three quarters of FY19 Corporate Compensation ratio to be consistent with historical levels Based on present mix of income, along with the favourable impacts of US tax reform, the FY19 effective tax rate is expected to be down on FY18 Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. Pie chart is based on 1H19 net profit contribution from operating groups as reported on 2 Nov 18 and has not been restated for business reorganisations affecting MAM, CAF and BFS that occurred during Dec

27 Short-term outlook While the impact of future market conditions makes forecasting difficult, we currently expect an increase of up to 15 per cent in the FY19 result compared with the FY18 result Our short-term outlook remains subject to: The conduct of period-end reviews and the completion rate of transactions Market conditions The impact of foreign exchange Potential regulatory changes and tax uncertainties Geographic composition of income 27

28 Medium-term 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 three significant businesses which are delivering superior returns following years of investment and acquisitions Macquarie Asset Management, Corporate and Asset Finance and Banking and Financial Services Two markets-facing businesses well positioned to benefit from improvements in market conditions with strong platforms and franchise positions Commodities and Global Markets and Macquarie Capital Ongoing benefits of continued cost initiatives Strong and conservative balance sheet Well matched funding profile with minimal reliance on short-term wholesale funding Surplus funding and capital available to support growth Proven risk management framework and culture 28

29 Approximate business Basel III Capital and ROE 30 September 2018 Operating Group APRA Basel III Capital 8.5% ($Ab) Annuity-style businesses 9.0 Macquarie Asset Management 2.2 Approx. 1H19 Return on Ordinary Equity 2 Approx. 12-Year Average Return on Ordinary Equity 2 Corporate and Asset Finance % 20% 3 Banking and Financial Services 2.6 Markets-facing businesses 7.0 Commodities and Global Markets 3.7 Macquarie Capital % 15% - 20% Corporate 0.4 Total regulatory capital 8.5% 16.4 Group surplus 3.4 Total APRA Basel III capital supply Business Group capital allocations are based on 30 Jun 18 allocations adjusted for material movements over the Sep 18 quarter. 2. NPAT used in the calculation of approx. annualised ROE is based on operating group s forecast 1H19 net profit contribution adjusted for indicative allocations of profit share, tax and other corporate expenses. Accounting equity is attributed to businesses based on regulatory capital requirements. Equity is based on the quarterly average equity usage from FY18 to 1H19 inclusive. 1H19 equity is based on 30 Jun 18 allocations adjusted for forecast material movements over the Sep 18 quarter. 12-year average covers FY07 to FY18, inclusively. 3. CAF returns prior to FY11 excluded from 12-year average as not meaningful given the significant increase in scale of CAF s platform over this period. 4. Comprising of $A16.6b of ordinary equity and $A3.2b of hybrids. 29

30 Medium-term Annuity-style businesses Macquarie Asset Management (MAM) Leading platform, well placed to grow assets under management through MAM s diversified product offering, track record and experienced local investment teams Well positioned for organic growth Corporate and Asset Finance (CAF) Leverage deep industry expertise to maximise growth potential in asset and loan portfolios Positioned for further asset acquisitions and realisations, subject to market conditions Targeting tailored finance and asset management solutions to clients across specialised assets through the cycles Banking and Financial Services (BFS) Strong growth opportunities through intermediary and direct retail client distribution, platforms and client service Opportunities to increase financial services engagement with existing business banking clients and extend into adjacent segments Modernising technology to improve client experience and support growth 1H19 Net profit contribution Markets-facing businesses Commodities and Global Markets (CGM) Opportunities to grow the commodities business, both organically and through acquisition Development of institutional and corporate coverage for specialised credit, rates and foreign exchange products Increase financing activities Growing the client base across all regions Leveraging a strong market position in Asia-Pacific through investment in the equities platform and further integration of the business across CGM Macquarie Capital (MacCap) Positioned to benefit from any improvement in M&A and capital markets activity Continues to tailor the business offering to current opportunities, market conditions and strengths in each sector and region Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. Pie chart is based on 1H19 net profit contribution from operating groups as reported on 2 Nov 18 and has not been restated for business reorganisations affecting MAM, CAF and BFS that occurred during Dec

31 05 Capital and funding Presentation to Debt Investors April 2019 MACQUARIE 2018

32 Strong regulatory ratios Bank Group (Dec 18) 1. Harmonised Basel III estimates are calculated in accordance with the BCBS Basel III framework. 2. Average LCR for Dec 18 quarter is based on an average of daily observations. 3. Includes the capital conservation buffer in the minimum CET1 ratio requirement. In Jul 19 the APRA minimum leverage ratio will be set at 4%. 32

33 Basel III capital position APRA Basel III Group capital at Dec 18 of $A20.4b, Group capital surplus of $A4.0b 1,2 1. Calculated at 8.5% RWA including the capital conservation buffer (CCB), per APRA ADI Prudential Standard 110. The APRA Basel III Group capital surplus is $A5.2b calculated at 7% RWA, per the internal minimum Tier 1 ratio of the Bank Group. 2. Based on materiality, the 8.5% used to calculate Group capital surplus does not include the countercyclical capital buffer (CCyB) of ~11bps. The individual CCyB varies by jurisdiction and the Bank Group s CCyB is calculated as a weighted average based on exposures in different jurisdictions. In Nov 18 the CCyB in the United Kingdom increased from 0.5% to 1.0% increasing the Bank Group s CCyB to ~11bps. 3. APRA Basel III super-equivalence includes the impact of changes in capital requirements in areas where APRA differs from the BCBS Basel III framework and includes full CET1 deductions for equity investments $A0.4b; differences in mortgages treatment $A0.7b; capitalised expenses $A0.4b; investment into deconsolidated subsidiaries $A0.2b; DTAs and other impacts $A0.4b. 4. Includes Foreign Currency Translation Reserve movement. 33

34 Balance sheet highlights 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 deposits 1 continuing to grow, up 9% to $A52.3b as at Sep 18 from $A48.1b as at Mar 18 $A5.9b 2 of term funding raised during 1H19: $A3.7b MGL loan facilities 3 $A1.0b Macquarie capital notes issuance $A0.7b MGL refinance of secured trade finance facility $A0.5b of term wholesale paper issued 1. Total customer deposits as per the funded balance sheet ($A52.3b) differs from total deposits as per the statutory balance sheet ($A52.6b). The funded balance sheet reclassifies certain balances to other funded balance sheet categories. 2. Issuances are AUD equivalent based on FX rates at the time of issuance and represent full facility size. 3. Includes $A0.9b green financing. 34

35 Conservative long standing liquidity risk management framework Liquidity Policy The key requirement of MGL and MBL s liquidity policy is that the entities are able to meet all liquidity obligations during a period of liquidity stress: A minimum 12 month period with constrained access to funding markets and with only a limited impact on franchise businesses Term assets are funded by term funding, stable deposits and equity Liquidity Framework A robust liquidity risk management framework is designed to ensure that both MGL and MBL are able to meet their funding requirements as they fall due under a range of market conditions. Key tools include: Liability driven approach to balance sheet management Scenario analysis Maintenance of unencumbered liquid asset holdings Liquidity management is performed centrally by Group Treasury, with oversight from the Asset and Liability Committee and the Risk Management Group The Boards of each entity approve the liquidity policy and are provided with liquidity reporting on a regular basis 35

36 Funded balance sheet remains strong These charts represent Macquarie s funded balance sheets at the respective dates noted above. 1. Other debt maturing in the next 12 months includes Structured Notes, Secured Funding, Bonds, Other Loans, Loan Capital maturing within the next 12 months and Net Trade Creditors. 2. Debt maturing beyond 12 months includes Loan Capital not maturing within next 12 months. 3. Non-controlling interests netted down in Equity and hybrids, Equity Investments and PPE and 'Loan assets (Incl. op leases) >1 year'. 4. Cash, liquids and self-securitised assets includes selfsecuritisation of repo eligible Australian assets originated by Macquarie. 5. Loan Assets (incl. op lease) < 1 year includes Net Trade Debtors. 6. Loan Assets (incl. op lease) > 1 year includes Debt Investment Securities. 7. Equity Investments and PPE includes Macquarie s co-investments in Macquarie-managed funds and equity investments. 36

37 Diversified issuance strategy Term funding as at 30 Sep 18 diversified by currency 1, tenor 2 and type Currency Tenor Type Well diversified issuance and funding sources Term funding beyond 1 year (excluding equity and securitisations) has a weighted average maturity of 4.6 years Term Issuance and Maturity Profile Sep 18: Weighted average maturity 4.6 yrs Issuances 3 Maturities FY15 FY16 FY17 FY18 1H19 <1 yr 1-2yrs 2-3yrs 3-4yrs 4-5yrs >5yrs Debt Loan Capital Equity and Hybrids AWAS Acquisition Facility Esanda Syndicated Facility Macquarie Air Finance Term Loan Note: All data presented in these charts represents drawn facilities. 1. Equity has been allocated to the AUD currency category. 2. Securitisations have been presented on a behavioural basis and represent funding expected to mature in >1yr. 3. Issuances exclude securitisations and other secured finance. Issuances are converted to AUD at the 30 Sep 18 spot rate. 4. Maturities excludes securitisations. Maturities shown are as at 30 Sep

38 Continued customer deposit growth Macquarie has been successful in pursuing its strategy of diversifying its funding sources by growing its deposit base In excess of 1 million BFS clients, of which approximately 600,000 are depositors Focus on the quality and composition of the deposit base Continue to grow deposits, CMA product has an average account balance of approx. $A41,000 Deposit trend $Ab Note: Total customer deposits include total BFS deposits of $A49.4b and $A2.9b of Corporate/Wholesale deposits. 38

39 Current credit ratings Macquarie Bank Limited Macquarie Group Limited Longterm rating Long-term rating outlook Shortterm rating Longterm rating Longterm rating outlook Shortterm rating Moody s A2 Stable P-1 A3 Stable P-2 Fitch A Stable F-1 A- Stable F-2 S&P A Developing A-1 BBB Positive A-2 39

40 06 Appendices Presentation to Debt Investors April 2019 MACQUARIE 2018

41 Appendix: Board and Management Changes A Presentation to Debt Investors April 2019 MACQUARIE 2018

42 Operating groups update Effective 1 December 2018 New Group Head of MAM and new Group Head of CAF Principal Finance Following the changes Macquarie s Executive Committees will include representatives based in all regions Some teams in MAM and CAF will be reorganised between operating groups to better align businesses with a shared focus on particular customer segments and geographies: Macquarie Vehicle Leasing will move from CAF Asset Finance into BFS given shared opportunities between the two businesses MSIS will move into CAF Asset Finance in the banking group while its fiduciary businesses, such as the infrastructure debt business (MIDIS), will move to MAM in the non-banking group on receipt of the required approvals Macquarie Capital s global real estate principal investment and private capital markets business will move into MAM and merge with MIRA Real Estate Effective 10 December 2018 CAF s Principal Finance and Transportation Finance businesses will transfer from the Bank Group to the Non-Bank Group. This simplifies the overall structure of MGL and better reflects the latest activities of the individual businesses. In connection with the transfer, it is proposed to return up to $2.04b capital from MBL. A meeting of MBL shareholders (which includes holders of Macquarie Income Securities) will be held to approve this resolution Transportation Finance will move from CAF Asset Finance into CAF Principal Finance Martin Stanley Macquarie Asset Management (MAM) Martin Stanley, currently Global Head of MIRA, will be appointed Group Head, MAM, and to the Executive Committee. Mr Stanley joined Macquarie in 2004 and has over 30 years of experience in asset management, infrastructure and utilities MAM will comprise MIRA and MIM. Mr Stanley, based in London, will also continue to lead MIRA globally Florian Herold Corporate and Asset Finance (CAF) Ben Brazil will step down as Group Head, CAF Principal Finance, and from the Executive Committee. He will become Chairman, CAF Principal Finance, and continue in that role until mid-2019 Florian Herold, currently Co-Head of CAF Principal Finance in EMEA, will be appointed Group Head, CAF Principal Finance. Mr Herold will move to Sydney and join the Executive Committee. Mr Herold joined Macquarie in 2009 and has over 15 years of investment experience 42

43 Board changes Jillian Broadbent AO Philip Coffey Nicholas Moore Shemara Wikramanayake Effective 5 November 2018 Jillian Broadbent AO will join the Boards of Macquarie Group Limited and Macquarie Bank Limited as an independent director Ms Broadbent was a Member of the Reserve Bank of Australia Board between 1998 and 2013 after 22 years at Bankers Trust Australia as an economic strategist and then as executive director responsible for risk management of foreign exchange, interest rates and commodities Ms Broadbent is the Chair of Swiss Re Life and Health Australia, Chancellor of the University of Wollongong and a Non- Executive Director of Woolworths Limited, the National Portrait Gallery of Australia and the Sydney Dance Company Effective 28 August 2018 Philip Coffey was appointed to the Boards of Macquarie Group Limited and Macquarie Bank Limited as an independent director Mr Coffey has extensive international experience in financial services and financial markets and most recently served as Deputy CEO of Westpac Banking Corporation between 2014 and 2017 Mr Coffey is a Non-Executive Director of Lendlease Corporation Limited, a member of the Clean Energy Finance Corporation Board and Chairman of the Westpac Bicentennial Foundation Effective 28 August 2018 Shemara Wikramanayake was appointed to the Boards of Macquarie Group Limited and Macquarie Bank Limited as an Executive Voting Director Effective 1 December 2018 Ms Wikramanayake will replace Nicholas Moore as Managing Director and CEO of Macquarie Group after 10 years as CEO and 33 years of service Accordingly, effective 30 November 2018, Mr Moore will step down from the Boards of Macquarie Group Limited and Macquarie Bank Limited 43

44 Management changes David Fass Paul Plewman Shawn Lytle Macquarie Infrastructure and Real Assets (MIRA) Effective 1 April 2019, David Fass will be appointed Head of MIRA, Americas. He will relocate to New York and as such will step down as regional CEO for Macquarie Group in EMEA and from the Group Management Committee Mr Fass joined Macquarie in 2011 and has over 25 years experience in financial services Europe, Middle East and Africa (EMEA) Effective 1 April 2019, Paul Plewman, currently Head of CGM in EMEA, will replace David Fass as regional CEO, EMEA, subject to regulatory approval Mr Plewman joined Macquarie in 2005 and has over 20 years of industry experience As regional CEO, Mr Plewman will join the Group Management Committee and become Chair of the EMEA Management Committee Macquarie Investment Management (MIM) On 14 January 2019, Shawn Lytle, previously Deputy Global Head of MIM, was appointed the new Global Head of MIM, following the appointment of Ben Bruck to the position of Executive Chairman, MIM Mr Lytle joined Macquarie in 2015 and has over 27 years experience in asset management. He is also Macquarie Group s US Country Head 44

45 B Appendix: Funding Presentation to Debt Investors April 2019 MACQUARIE 2018

46 Funded balance sheet reconciliation Macquarie s statement of financial position 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 of Macquarie to the assets that require funding Sep 18 $Ab Mar 18 $Ab Total assets per Statement of Financial Position Accounting deductions: Self-funded trading assets (18.2) (16.7) (20.1) Derivative revaluation accounting gross-ups (18.0) (11.8) (10.4) Segregated funds (10.5) (9.8) (9.0) Outstanding trade settlement balances (9.3) (7.0) (7.5) Short-term working capital assets (7.5) (6.8) (6.2) Non-controlling interests (0.2) (1.4) (1.4) Non-recourse funded assets: Securitised assets and other non-recourse funding (7.5) (9.0) (11.3) Total assets per Funded Balance Sheet Sep 17 $Ab For an explanation of the above deductions refer to slide 50 46

47 Funding for Macquarie Funding sources Sep 18 $Ab Mar 18 $Ab Sep 17 $Ab Certificates of deposits Commercial paper Net trade creditors Structured notes Secured funding Bonds Other loans Syndicated loan facilities Customer deposits Loan capital Equity and hybrids Total funding sources Funded assets Cash and liquid assets Self-securitisation Net trading assets Loan assets including operating lease assets less than one year Loan assets including operating lease assets greater than one year Debt investment securities Co-investment in Macquarie-managed funds and other equity investments Property, plant & equipment and intangibles Total funded assets Well diversified funding sources Minimal reliance on short-term wholesale funding markets Deposit base represents 39% 2 of total funding sources Term funding beyond one year (excluding equity and securitisations) has a weighted average term to maturity of 4.6 years 2 $Ab Macquarie term funding maturing beyond one year (includes equity and hybrids) 3 1. Includes ordinary capital and Macquarie Income Securities of $A0.4b. 2. As at 30 Sep Includes drawn term funding facilities only. 47

48 Funding for the Bank Group Funding sources Sep 18 $Ab Mar 18 $Ab Sep 17 $Ab Certificates of deposit Commercial paper Net trade creditors Structured notes Secured funding Bonds Other loans Syndicated loan facilities Customer deposits Loan capital Equity and hybrids Total funding sources Funded assets Cash and liquid assets Self-securitisation Net trading assets Loan assets including operating lease assets less than one year Loan assets including operating lease assets greater than one year Debt investment securities Non-Bank Group deposit with MBL (14.1) (12.9) (4.2) Co-investment in Macquarie-managed funds and other equity investments Property, plant and equipment and intangibles Total funded assets Bank balance sheet remains liquid, well capitalised and with a diversity of funding sources Term funding beyond one year (excluding equity and securitisations) has a weighted average term to maturity of 4.1 years 2 Accessed term funding in markets including US, Europe and Australia as well as opening new markets $Ab Bank Group term funding maturing beyond one year (includes equity and hybrids) 3 1. Includes ordinary capital and Macquarie Income Securities of $A0.4b. 2. As at 30 Sep Includes drawn term funding facilities only. 48

49 Funding for the Non-Bank Group Funding sources Sep 18 $Ab Mar 18 $Ab Sep 17 $Ab Net trade creditors Structured notes Secured funding Bonds Other loans Syndicated loan facilities Loan capital Equity Total funding sources Funded assets Cash and liquid assets Non-Bank Group deposit with MBL Net trading assets Loan assets less than one year Loan assets greater than one year Debt investment securities Co-investment in Macquarie-managed funds and other equity investments Property, plant and equipment and intangibles Total funded assets Non-Bank Group is predominately term funded Term funding beyond one year (excluding equity) has a weighted average term to maturity of 5.2 years 2 $Ab Non-Bank Group term funding maturing beyond one year (includes equity) 3 1. Macquarie Group Capital Notes 2 & 3 of $A1.5b. 2. As at 30 Sep Includes drawn term funding facilities only. 49

50 Explanation of Funded Balance Sheet reconciling items 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 and counterparties. Also as part of its trading activities, Macquarie pays and receives margin collateral on its outstanding derivative positions. These trading related asset and liability positions are presented gross on the statement of financial position but are viewed as being self-funded to the extent that they offset one another and, therefore, are netted as part of this adjustment Derivative revaluation accounting gross-ups: Macquarie s derivative activities are mostly client driven with client positions hedged by offsetting positions with a variety of counterparties. The derivatives are largely matched and this adjustment reflects that the matched positions do not require funding Segregated funds: These represent the assets and liabilities that are recognised where Macquarie provides products such as investment-linked policy contracts or where Macquarie holds segregated client monies. The policy (contract) liability and client monies will be matched by assets held to the same amount and hence do not require funding Outstanding trade settlement balances: At any particular time Macquarie will have outstanding trades to be settled as part of its brokering business and trading activities. These amounts (payables) can be offset in terms of funding by amounts that Macquarie is owed on other trades (receivables) Short-term working capital assets: As with the outstanding trade settlement balances above, Macquarie through its day-to-day operations generates working capital assets (e.g. receivables and prepayments) and working capital liabilities (e.g. creditors and accruals) that produce a net balance that either requires or provides funding Non-controlling interests: These represent the portion of equity ownership in subsidiaries not attributable to Macquarie. As this is not a position that Macquarie is required to fund it is netted against the consolidated assets and liabilities in preparing the funded balance sheet Securitised assets and other non-recourse funding: These represent assets that are funded by third parties with no recourse to Macquarie including lending assets (mortgages and leasing) sold down into external securitisation entities 50

51 Appendix: Other Financial Information C Presentation to Debt Investors April 2019 MACQUARIE 2018

52 Capital management update Impact of changes to CAF business structure: As previously foreshadowed, the transfer of the CAF Principal Finance and CAF Transportation businesses from the Bank Group to the Non-Bank Group occurred on 10 December 2018 following a meeting of MBL shareholders (which includes holders of Macquarie Income Securities) which approved the transaction In connection with the transfer, MBL returned $A2.04b of capital to MGL. Additionally, the transfer resulted in a post-tax increase in ordinary equity for MBL of approximately $A0.3b which was paid as a dividend to MGL 1 MSIS has been transferred into CAF Asset Finance in the Bank Group while its fiduciary businesses, such as the infrastructure debt business (MIDIS), will move into MAM in the Non-Bank Group on receipt of the required approvals 1. Via the intermediate holding company, Macquarie B.H. Pty Ltd. 52