Macquarie Group Ltd.

Primary Credit Analyst: Gavin J Gunning, Melbourne (61) 3-9631-2092; gavin.gunning@standardandpoors.com Secondary Contact: Nico N DeLange, Sydney (61) 2-9255-9887; nico.delange@standardandpoors.com Table Of Contents Major Rating Factors Rationale Outlook Related Criteria And Research WWW.STANDARDANDPOORS.COM/RATINGSDIRECT DECEMBER 19, 2013 1

SACP bbb+ + Support 0 + Additional Factors -1 Anchor a- Business Position Capital and Earnings Adequate 0 Adequate 0 Risk Position Moderate -1 GRE Support 0 Group Support 0 Issuer Credit Rating BBB/Stable/A-2 Funding Liquidity Average Adequate 0 Sovereign Support 0 Major Rating Factors Strengths: Well-diversified business position, strong Australian market share, and strong market position in specialized commercial banking, investment banking and asset management Very good risk-management track record Main operating entity, Macquarie Bank Ltd. (MBL), is a potential recipient of extraordinary Australian government support, in the unlikely event it were required Weaknesses: Moderate risk position, due to the wide range and complex nature of credit, market, operational, and other risks Reliant on non-deposit funding sources Rationale Our ratings on MGL Group Ltd. (MGL) reflect the anchor stand-alone credit profile (SACP) for a financial institution operating mainly in Australia; plus the group's "adequate" business position, "adequate" capital and earnings, "moderate" risk position; "adequate" liquidity; "average" funding and its status as a holding company for MGL group of businesses. Anchor: Our bank criteria use the BICRA economic risk and industry risk scores to determine a bank's anchor SACP, the starting point in assigning an issuer credit. The anchor SACP for a bank operating only in Australia is 'a-'. MGL, as a diversified financial institution whose main operating entity is Macquarie Bank Ltd (MBL; A/Stable/A-1), conducts WWW.STANDARDANDPOORS.COM/RATINGSDIRECT DECEMBER 19, 2013 2

more than 40% of its business in its Australian home market. The BICRA score is informed by our evaluation of economic risk, whereby we view Australia as a wealthy, open, and resilient economy. We consider that build-up of private sector credit and asset prices has eased in the recent years, and that moderate private sector debt is offset by conservative lending practices and a creditor-supportive legal framework. With regard to industry risk, our assessment of the Australian banking industry is underpinned by the country's conservative and comprehensive regulation, and the banking sector's very low risk appetite, partly offset by limited funding support from customer deposits and a material dependence on net external borrowings. MGL conducts most of the remainder of its business in regions that overall have weaker economic risk scores than Australia, including countries in the Americas, Europe, and Asia. Consequently, the weighted average economic risk score for MGL is weaker than that for Australian financial institutions that have higher proportions of domestic business, although not to the extent that it affects MGL's anchor SACP. The group credit profile (GCP) of MGL--being the group entity that takes into account all economic risks associated with MGL and subsidiaries--is 'bbb+'. As a holding company, however, under our rating criteria, the long-term counterparty credit rating of MGL is one notch lower than the GCP, mainly due to MGL's reliance on operating companies within the group. We note that the main operating entity and Australian-licensed bank within the Macquarie group is MBL. MBL accounts for a significant proportion of MGL's on-balance sheet activities. Table 1 Macquarie Group Ltd. Key Figures --Year-ended March 31-- (Mil. A$) 2013 2012 2011 2010 2009 Adjusted assets 142,317 146,371 151,192 139,638 144,071 Customer loans (gross) 51,136 48,280 49,955 49,468 50,069 Adjusted common equity 9,295 9,300 9,258 9,235 7,607 Operating revenues 6,768 7,076 7,650 6,371 6,027 Noninterest expenses 5,246 5,863 6,329 5,357 4,542 Core earnings 834 770 922 688 931 Business position: In our opinion, MGL's business position is "adequate." MGL's business position benefits from high levels of business and geographic diversity, and our overall favorable view of MGL's management and strategy. MGL is Australia's most diversified rated financial institution, considering its relatively small size by international standards and compared with Australia's four major banking groups. Under six main operating divisions, MGL demonstrates a broad spread of business lines, and is well-diversified internationally. We view the diversity of MGL's operations, which assist it in managing the vagaries of economic and business cycles, as a relative strength underpinning our assessment. Further, our view is that MGL's performance has been relatively good in response to the global financial crisis as it now has transitioned to a broader business base emphasizing higher levels of annuity-like revenues. That said, many markets in which MGL operates are inherently complex and volatile, which has a counterbalancing and constraining effect on our view of MGL's business stability, and our otherwise favorable view of its business position. Compared with buoyant economic times prior to the global financial crisis (GFC), the contribution from MGL's WWW.STANDARDANDPOORS.COM/RATINGSDIRECT DECEMBER 19, 2013 3

securities and capital markets divisions has been well down, negatively impacted by low market volumes, depressed prices, and generally quiet market activity. Supporting MGL's business position, however, are other of its businesses that we would typically expect to demonstrate more stable and predictable revenues, such as those associated with asset management, corporate, and asset finance, and banking and financial services businesses. While still well below pre-gfc levels, the profitability from the securities and capital markets divisions continues to improve, with Sept. 30, 2013, half-year results well up on the corresponding period last year. MGL's business position also benefits from its strong market position and market share in its Australian home market in a range of specialized commercial banking and investment banking business lines, and in asset management. Affording us a degree of comfort concerning the continuing adequacy of MGL's business position at the current rating level is the resilience that MGL has demonstrated during its 44 year operating history in Australia (since its genesis in 1969 as the small Sydney branch operations of the U.K. based Hill Samuel). MGL has endured a wide range and intensity of economic and business cycles, at the same time transforming itself into a significantly larger and more diverse financial institution. MGL has generally been successful over the years in warding off periodic forays into the Australian market by foreign commercial and investment banks interested in expanding in some of the markets and product lines in which MGL operates. In our opinion, MGL's strategy is sound. MGL made a strategic shift following the GFC toward broadening its business base and reducing its reliance on equity markets by expanding into sectors with generally stable revenue characteristics and/or low loss expectations. We believe this trend will continue, and that there is the potential for MGL to execute its strategies by acquisition as well as organic growth. We expect that any acquisition opportunities, should they arise, will be conceptualized on sound foundations and will not detract from the group's sound financial position. Should this not occur, there is the possibility for negative ratings momentum. Table 2 Macquarie Group Ltd. Business Position --Year-ended March 31-- (%) 2013 2012 2011 2010 2009 Total revenues from business line (mil. A$) 6,889 7,142 7,793 6,854 6,027 Commercial & retail banking/total revenues from business line 30.9 22.5 22.2 16.1 17.8 Trading and sales income/total revenues from business line 18.7 19.1 18.2 21.6 17.2 Corporate finance/total revenues from business line 15.4 15.1 10.1 6.7 3.5 Brokerage/total revenues from business line 10.8 21.7 29.5 46.2 47.6 Asset management/total revenues from business line 21.7 19.1 18.1 6.2 5.6 Other revenues/total revenues from business line 1.3 1.5 0.8 2.5 7.4 Investment banking/total revenues from business line 34.1 34.2 28.3 28.2 20.7 Return on equity 7.31 6.19 8.18 10.26 9.07 Capital and earnings: We assess MGL's capitalization and earnings as "adequate." Our opinion is that over the next 12 to 18 months the group's pre-diversification risk-adjusted capital (RAC) ratio will rest comfortably within our "adequate" range under our ratings criteria. We expect that MGL's RAC will migrate to below 9% for its full year ended March 31, 2014, due mainly WWW.STANDARDANDPOORS.COM/RATINGSDIRECT DECEMBER 19, 2013 4

to the effects of the distribution of Sydney airport securities to MGL shareholders. The quality of the group's capital is also good, by domestic and international standards, being mainly comprised by common equity and retained earnings. Hybrid capital instruments play an important but supplemental role in capital management. While we continue to monitor future regulatory developments for their potential impact on our view of MGL's capital, our current belief is that MGL will be likely to maintain capital consistent with our current assessment. Recent earnings have been sound in the context of the rating assigned, with MGL generating A$501 million of reported earnings for its fiscal half year ended Sept. 30, 2013. MGL's future earnings prospects remain adequate at the current rating level, noting that we retain our view that its earnings profile remains leveraged to an equity and capital markets recovery. Future profitability should continue to be assisted by the generally stable outlook for its businesses with annuity-like earnings profiles. Table 3 Macquarie Group Ltd. Capital And Earnings --Year-ended March 31-- (%) 2013 2012 2011 2010 2009 Adjusted common equity/total adjusted capital 85.1 85.1 87.1 95.3 90.6 Net interest income/operating revenues 20.2 18.8 16.7 17.0 15.6 Fee income/operating revenues 49.4 46.5 49.8 57.7 66.2 Market-sensitive income/operating revenues 16.5 15.3 20.7 20.7 16.5 Noninterest expenses/operating revenues 77.5 82.9 82.7 84.1 75.4 Preprovision operating income/average assets 1.0 0.8 0.8 0.7 0.9 Core earnings/average managed assets 0.5 0.5 0.6 0.5 0.6 Risk position: We continue to view MGL's risk position as "moderate", noting that no new or material risks have emerged during 2013 that cause us any rating concerns. Our opinion is that many of the risks that MGL must routinely manage are broad ranging, complex, and inherently difficult to model, manage, and predict, and that MGL must contend with a broader range and complexity of credit and non-credit risks associated with its entrepreneurial culture compared with Australian retail and commercial banks, including the four major banking groups. We believe that careful management of these risks is a precursor to continuing investor and stakeholder confidence in the institution and to the maintenance of our ratings at current levels. Offsetting our concerns regarding the inherent nature and complexity of the group's risk position, to an extent, are diversification benefits associated with the group's broad spread of risks, and the group's growth appetite--which has historically been quite strong but well-managed. Further, MGL has a very good risk-management track record, and a continuation of this trend is viewed as important in us retaining confidence at the current rating level. We note that net charge-offs continue to be lower than normalized losses that we would expect to be associated with MGL's business base. More generally, we note that asset quality metrics improved slightly during fiscal 2013, and we believe provisioning coverage associated with impairments is adequate. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT DECEMBER 19, 2013 5

Table 4 Macquarie Group Ltd. Risk Position --Year-ended March 31-- (%) 2013 2012 2011 2010 2009 Growth in customer loans 5.9 (3.4) 1.0 (1.2) (10.7) Total managed assets/adjusted common equity (x) 16.2 16.5 17.0 15.8 19.6 New loan loss provisions/average customer loans 0.4 0.3 0.2 0.3 0.9 Net charge-offs/average customer loans 0.4 0.1 0.2 0.3 0.1 Gross nonperforming assets/customer loans + other real estate owned 2.5 3.0 3.0 3.9 3.9 Loan loss reserves/gross nonperforming assets 44.3 43.6 37.6 29.7 33.5 Funding and liquidity: We assess MGL's funding as "average" and liquidity as "adequate". While MGL is considered by us to be reliant on wholesale funding and non-deposit sources of funding, we note that MGL has progressively strengthened funding over recent years. We do not consider MGL as materially differing from the funding profile represented in the industry risk score, and because, on balance, funding exhibits broadly similar funding metrics when compared to banks in the same country. Against some quantitative funding metrics, however, such as the loan-to-deposits ratio, MGL compares slightly more favorably to some rated Australian financial institutions, including the Australian major bank peer average. Considering factors such as their extensive retail deposit-gathering capabilities and branch networks, and highly prominent retail brands, however, the Australian major banks are considered as demonstrating some qualitative funding strengths compared with MGL and other Australian financial institutions. We regard MGL as having good liquidity-management capabilities under normal and difficult market conditions. Holdings of on-balance sheet liquid assets are large relative to MGL's size, and MGL's liquidity ratios are materially more favorable than the four Australian major banks'. Further, other sources of potential liquidity available to MGL give us additional comfort, such as internal securitization and the repo-eligibility of assets with The Reserve Bank of Australia (RBA). We note that the RBA will step in so banks can comply with Basel III liquidity rules by making available a committed liquidity facility (CLF) for banks in order to meet the liquidity-coverage-ratio requirements, effective Jan. 1, 2015. We understand that securities to be used under the CLF would also include self-securitised mortgages in addition to the securities eligible for the RBA's normal market operations. We currently believe it is likely that the CLF will function in the same way in stressed market conditions as high-quality liquid assets would do. MGL is considered as having a well-developed liquidity risk management framework, and we do not currently envisage MGL as facing any major unusual or large liquidity needs in the short-to-medium term. Table 5 Macquarie Group Ltd. Funding And Liquidity --Year-ended March 31-- (%) 2013 2012 2011 2010 2009 Core deposits/funding base 40.1 37.9 34.3 23.8 22.6 Customer loans (net)/customer deposits 123.0 128.2 139.8 217.4 226.0 Long term funding ratio 73.6 76.5 71.6 69.5 71.5 Stable funding ratio 95.3 97.5 94.6 92.3 96.4 Short-term wholesale funding/funding base 29.5 26.3 31.6 33.8 31.1 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT DECEMBER 19, 2013 6

Table 5 Macquarie Group Ltd. Funding And Liquidity (cont.) Broad liquid assets/short-term wholesale funding (x) 1.3 1.5 1.3 1.2 1.3 Net broad liquid assets/short-term customer deposits 22.8 34.8 31.6 33.8 38.5 Short-term wholesale funding/total wholesale funding 47.9 41.2 47.1 44.1 39.7 Table 6 Standard & Poor's Risk-Adjusted Capital Framework, Macquarie Group Ltd. EAD* Basel II RWA `--Year ended March 31-- Average Basel II RW (%) Standard & Poor's RWA Average Standard & Poor's RW (%) Government and central banks 11,212 0 0 358 3 Institutions 17,755 0 0 3,630 20 Corporate 32,602 0 0 22,267 68 Retail 21,314 0 0 10,392 49 Of which mortgage 11,229 0 0 3,762 34 Securitization 4,210 0 0 5,233 124 Other assets 4,388 0 0 4,438 101 Total credit risk 91,481 0 0 46,317 51 Equity in the banking book** 5,595 0 0 36,402 651 Trading book market risk -- 4,925 -- 10,739 -- Total market risk -- 4,925 -- 47,141 -- Total insurance risk -- -- -- 2,113 -- Total operational risk -- 0 -- 24,634 -- RWA before diversification -- 4,925 -- 120,204 100 Total diversification/concentration adjustments -- -- -- (5,447) (5) RWA after diversification -- 4,925 -- 114,757 95 Tier 1 capital Tier 1 ratio (%) Total adjusted capital Standard & Poor's RAC ratio (%) Capital ratio before adjustments N/A N/A 10,926 9.1 Capital ratio after adjustments N/A N/a 10,926 9.5 *Exposure at default. Risk-weighted assets. Securitisation exposure includes the securitisation tranches deducted from capital in the regulatory framework. **Includes the minority equity holdings in financial institutions. For Tier 1 ratio, adjustments are additional regulatory requirements (e.g. transitional floor or Pillar 2 add-ons). Support: Our counterparty credit rating on MGL mainly reflects MGL's SACP characteristics, as we believe that MGL has a low likelihood of extraordinary government support in a crisis. Our counterparty credit rating on MGL is one notch below the GCP of the Macquarie group, considering MGL's status as a holding company. Our counterparty credit rating on MBL, however, is two notches higher than the GCP, reflecting our view of MBL's "moderately high" likelihood of extraordinary government support in a crisis. We believe this is due to MBL's "moderate" systemic importance to Australia's economy, and our assessment of the Australian government as being "highly supportive" of institutions that are core to the national economy. We believe such potential government WWW.STANDARDANDPOORS.COM/RATINGSDIRECT DECEMBER 19, 2013 7

support may only be available to MBL, as the Australian licensed banking entity, and not to other entities within MGL. We note that future regulatory developments, including on the topic of bank resolution frameworks have the potential to negatively influence our ratings view on MBL and other systemically important Australian banks. While non-banking parts of MGL are supervised by the Australian Prudential Regulation Authority (APRA), our opinion is that they would be less-likely to be a potential recipient of Australian government support. We believe this would particularly be the case for non-banking businesses of MGL, with a less direct or obvious connection to Australia. We also note that retail deposits are generated by MBL, and, in our view, the Australian government would have more incentives to provide support to retail depositors than non-bank, non-australian stakeholders in MGL. We believe that the government would be most likely to expect that the beneficiaries of any support provided to MGL would be for the benefit of MBL, and in particular, Australian stakeholders in MBL. Further, in a hypothetical stress scenario, if the government were to consider extending support to MBL, our opinion is that it may have a contemporaneous expectation that MGL would find financial strength from elsewhere within the group, including from non-bank parts of the group, with a less-direct business or geographic connection to Australia, to support Australian stakeholders in MBL. Additional rating factors: The issue ratings on MGL's non-deferrable subordinated debt are 'BBB-', which is one notch below MGL's issuer credit rating, reflecting structural subordination behind senior obligations of MGL. We note that the short-to-medium term prospects for MGL experiencing financial stress requiring a restructuring of the bank or group to the detriment of non-deferrable subordinated debt holders is low. MGL's hybrid capital instruments are rated 'BB+', which is two notches below its SACP. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT DECEMBER 19, 2013 8

Outlook: Stable The stable outlook reflects our view that the ratings are likely to remain unchanged over the next one-to-two years. To maintain the stable outlook, we expect that: Continuing good performance and risk management by MGL and key operating units, in particular, by the licensed banking entity Macquarie Bank Ltd (MBL); MGL's risk position or earnings will not deteriorate materially or unexpectedly, and there will be no material increase by MGL in its risk appetite; Risk-adjusted capitalization will remain consistent with our current view; Recent funding improvements can be sustained, on an ongoing basis, and funding and liquidity risks including potential confidence sensitivity will continue to be adequately managed; Regulatory developments will continue to be supportive of our current ratings, and we continue to believe that there will be a moderately high likelihood of extraordinary government support for MBL (in unlikely event that it were required). We believe that the prospects for our ratings on MGL being raised are relatively low over the short-to-medium term. We could lower our ratings if we believed that risk-adjusted capital were likely to migrate toward or below the 7% range, noting that we do not expect this to occur. Should acquisition opportunities arise, our expectation is the MGL would maintain a risk adjusted capital ratio of above 7%, even if capital ratios may decline from their current levels. We currently believe that a potential negative revision of our economic risk score for Australia to '3' from '2', all other rating factors remaining equal and unchanged, would be unlikely by itself to cause a negative revision of our opinion concerning MGL's capital. Further, we note that negative ratings momentum could arise if our view of MGL's funding or liquidity weakens materially. Related Criteria And Research Related Criteria Banks: Rating Methodology And Assumptions, Nov. 9, 2011 Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011 Bank Capital Methodology And Assumptions, Dec. 6, 2010 Revised Market Risk Charges For Banks In Our Risk-Adjusted Capital Framework, June 22, 2012 Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011 Group Rating Methodology, Nov 19, 2013 Standard & Poor's (Australia) Pty. Ltd. holds Australian financial services licence number 337565 under the Corporations Act 2001. Standard & Poor's credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act). WWW.STANDARDANDPOORS.COM/RATINGSDIRECT DECEMBER 19, 2013 9

Anchor Matrix Industry Risk Economic Risk 1 2 3 4 5 6 7 8 9 10 1 a a a- bbb+ bbb+ bbb - - - - 2 a a- a- bbb+ bbb bbb bbb- - - - 3 a- a- bbb+ bbb+ bbb bbb- bbb- bb+ - - 4 bbb+ bbb+ bbb+ bbb bbb bbb- bb+ bb bb - 5 bbb+ bbb bbb bbb bbb- bbb- bb+ bb bb- b+ 6 bbb bbb bbb- bbb- bbb- bb+ bb bb bb- b+ 7 - bbb- bbb- bb+ bb+ bb bb bb- b+ b+ 8 - - bb+ bb bb bb bb- bb- b+ b 9 - - - bb bb- bb- b+ b+ b+ b 10 - - - - b+ b+ b+ b b b- Ratings Detail (As Of December 19, 2013) Macquarie Group Ltd. Counterparty Credit Rating Preferred Stock Senior Unsecured South Africa National Scale Senior Unsecured Short-Term Debt South Africa National Scale Short-Term Debt A-2 Subordinated Counterparty Credit Ratings History 01-Dec-2011 17-Feb-2010 17-Sep-2008 Sovereign Rating Australia (Commonwealth of) (Unsolicited Ratings) Related Entities Macquarie Bank Ltd. Issuer Credit Rating Commercial Paper Foreign Currency Preference Stock Senior Unsecured Greater China Regional Scale Senior Unsecured Short-Term Debt A-1 Subordinated BBB/Stable/A-2 BB+ zaaa BBB zaa-1 BBB/Stable/A-2 A-/Stable/A-2 A-/Negative/A-2 AAA/Stable/A-1+ A/Stable/A-1 A/A-1 BBB- BBB- cnaa+ A BBB WWW.STANDARDANDPOORS.COM/RATINGSDIRECT DECEMBER 19, 2013 10

Ratings Detail (As Of December 19, 2013) (cont.) Macquarie Capital Loans Management Ltd. Preference Stock Macquarie Finance Ltd. Junior Subordinated Macquarie Financial Holdings Ltd. Issuer Credit Rating Macquarie International Finance Ltd. Issuer Credit Rating Macquarie Life Ltd. Financial Strength Rating Local Currency Issuer Credit Rating Local Currency BB+ BBB- BBB/Stable/A-2 A-/Stable/A-2 A-/Stable/-- A-/Stable/-- *Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable across countries. Standard & Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT DECEMBER 19, 2013 11

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