presentation to investors and analysts€¦ · note: net profit contribution is management...

Presentation to investors and analysts

27 October 2017

Result announcement for the half-year ended 30 September 2017

2

The material in this presentation has been prepared by Macquarie Group Limited ABN 94 122 169 279 (MGL) and is general background information aboutMacquarie’s (MGL and its subsidiaries) activities current as at the date of this presentation. This information is given in summary form and does not purport to becomplete. 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 orselling securities or other financial products or instruments and does not take into account your particular investment objectives, financial situation or needs. Beforeacting 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 securitiesand financial product or instrument transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or politicaldevelopments 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 andfinancial condition, capital adequacy, provisions for impairments and risk management practices. Readers are cautioned not to place undue reliance on theseforward looking statements. Macquarie does not undertake any obligation to publicly release the result of any revisions to these forward looking statements or tootherwise update any forward looking statements, whether as a result of new information, future events or otherwise, after the date of this presentation. Actualresults may vary in a materially positive or negative manner. Forward looking statements and hypothetical examples are subject to uncertainty and contingenciesoutside Macquarie’s control. Past performance is not a reliable indication of future performance.

Unless otherwise specified all information is for the half-year ended 30 September 2017.

Certain financial information in this presentation is prepared on a different basis to the Financial Report within the Macquarie Interim Financial Report (“the FinancialReport”) for the half-year ended 30 September 2017, which is prepared in accordance with Australian Accounting Standards. Where financial information presentedwithin 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 thefunding profile of Macquarie because maintaining the structural integrity of Macquarie’s balance sheet requires active management of both asset and liabilityportfolios. Active management of the funded balance sheet enables the Group 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 byPricewaterhouseCoopers.

Disclaimer

Macquarie 1H18 result announcement macquarie.com Introduction Overview of Result Result Analysis and Financial Management Outlook Appendices

MACQUARIE 2017

Agenda

1. Introduction – Karen Khadi

2. Overview of Result – Nicholas Moore

3. Result Analysis and Financial Management – Patrick Upfold

4. Outlook – Nicholas Moore

5. Appendices


MACQUARIE 2017

Introduction01 Karen Khadi – Head of Investor Relations


MACQUARIE 2017

Overview of Result02 Nicholas Moore – Managing Director and Chief Executive Officer


6

Building for the long-term

1. As at 30 Sep 17. 2. CAF Principal Finance formerly known as CAF Lending. 3. Funds on platform includes Macquarie Wrap and Vision. 4. BFS deposits exclude corporate/wholesale deposits.

Corporate and Asset Finance (CAF)

• Global provider of specialist finance and asset management solutions, with a $A35.5b1 asset and loan portfolio

• Asset Finance has global expertise in aircraft, vehicles, technology, healthcare, manufacturing, industrial, energy, rail, and mining equipment

• Principal Finance2 provides flexible primary financing solutions and engages in secondary market investing, across the capital structure. It operates globally in both

corporate and real estate sectors

Banking and Financial Services (BFS)

• Macquarie’s retail banking and financial services business with a $A37.6b1 Australian loan portfolio, funds on platform3 of $A78.9b1 and BFS deposits4 of $A46.4b1

• Provides a diverse range of personal banking, wealth management and business banking products and services to retail clients, advisers, brokers and

business clients

Commodities and Global Markets (CGM)

• Integrated, end-to-end offering across global markets including equities, fixed income, foreign exchange and commodities

• Provides clients with risk and capital solutions across physical and financial markets

• Diverse platform covering more than 25 market segments, with more than 160 products

• Growing presence in commodities (natural gas, LNG, NGLs, power, oil, coal, base metals, iron ore, sugar and freight)

• Global institutional securities house with strong Asia-Pacific foundations covering sales, research, ECM, execution and derivatives and trading activities

Macquarie Capital (MacCap)

• Global capability in M&A Advisory, Debt and Equity Capital Markets and Principal Investments

• Focus on core areas of expertise: Infrastructure, Utilities and Renewables; Real Estate; Telecommunications, Media, Entertainment & Technology; Resources;

Industrials; and Financial Institutions

ABOUT MACQUARIE


Capital

markets

facing

businesses

Macquarie Asset Management (MAM)

• Top 50 global asset manager with $A471.9b1 of assets under management

• Provides clients with access to a diverse range of capabilities and products, including infrastructure, real assets, equities, fixed income, liquid alternatives and multi-

asset investment management solutions

Annuity-

style

businesses

7

1H18

$Am

2H17

$Am

1H17

$Am1H18 v

1H17

1H18 v

2H17

Net operating income 5,397 5,146 5,218 3% 5%

Total operating expenses (3,693) (3,527) (3,733) 1% 5%

Operating profit before income tax 1,704 1,619 1,485 15% 5%

Income tax expense (448) (430) (438) 2% 4%

Effective tax rate1 (%) 26.4 26.9 29.4

(Profit)/loss attributable to non-controlling interests (8) (22) 3

Profit attributable to MGL shareholders 1,248 1,167 1,050 19% 7%

Annualised return on equity (%) 16.7 15.8 14.6 14% 6%

Basic earnings per share $A3.70 $A3.46 $A3.12 19% 7%

Ordinary dividends per share $A2.05 $A2.80 $A1.90 8% 27%

1H18 result: $A1,248m up 19% on 1H17; up 7% on 2H17


1. Calculation of the effective tax rate is after adjusting for the impact of non-controlling interests.

8

CGM14%

MacCap7%

BFS11%

CAF23%

MAM45%

Net profit

contribution

1H18 net profit contribution from operating groups$A2,662m up 14% on 1H17; up 12% on 2H17


CGM: on 1H17Reduced income from the sale of investments

and lower volatility across the commodities

platform resulting in reduced client activity and

trading opportunities

Macquarie Capital: on 1H17Increased client activity in DCM, offset by

subdued activity in M&A and ECM, and lower

investment-related income

Note: Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. Pie chart is based on 1H18 net profit contribution from operating groups.

MAM: on 1H17Continued strong performance, benefited from

increased performance fees; base fees and

investment-related income broadly in line

CAF: on 1H17Leasing book continued to perform well; higher

prepayments, realisations and investment-related

income in Principal Finance albeit reduced income

from lower portfolio volumes; reduced provisions and

impairments overall

ANNUITY-STYLE BUSINESSES

$A2,094m 28% ON 1H17

30% ON 2H17

BFS: on 1H17Volume growth in loan and deposit portfolios and

improved margins; 1H17 benefited from the gain on

sale of Macquarie Life’s risk insurance business

CAPITAL MARKETS FACING BUSINESSES

$A568m 18% ON 1H17

25% ON 2H17

9

Financial performance


1H18 OPERATING INCOME

Operating income $A5,397m

1H18 DPS

DPS $A2.05

1H18 PROFIT

Profit $A1,248m

1H18 EPS

EPS $A3.70

3%

ON 1H17

5%

ON 2H17

19%

ON 1H17

7%

ON 2H17

19%

ON 1H17

7%

ON 2H17

8%

ON 1H17

27%

ON 2H17

4,400

4,800

5,200

5,600

1H16 2H16 1H17 2H17 1H18

$Am

-

1.00

2.00

3.00

4.00

1H16 2H16 1H17 2H17 1H18

$A

-

1.00

2.00

3.00

1H16 2H16 1H17 2H17 1H18

$A

-

500

1,000

1,500

1H16 2H16 1H17 2H17 1H18

$Am

10

AUM decreased $A8.1b since 31 Mar 17, largely due to net asset realisations in MIRA2 and unfavourable

currency movements in MIM, partially offset by positive market movements

1. As at 30 Sep 17. 2. Includes divestment of Thames Water by MIRA-managed funds and ceasing asset services to consortia investors ($A25b).

Assets under management of $A473.6 billion1


$Ab

-

100

200

300

400

500

Mar 14 Mar 15 Mar 16 Mar 17 Sep 17

Fixed income Infrastructure Equities Other Real estate

11

Diversification by region

1. Net operating income excluding earnings on capital and other corporate items. 2. Includes New Zealand.

International income 62% of total income1

Total staff 13,966; International staff 55% of total


Europe, Middle East and Africa

$A1,496m 1,694INCOME STAFF

28% OF TOTAL

EUROPEDublinEdinburghFrankfurtGenevaLondonLuxembourg

MadridMunichParisReadingViennaZurich

MIDDLE EASTAbu DhabiDubaiSOUTH AFRICACape TownJohannesburg

Asia

$A548mINCOME

10% OF TOTAL

3,445STAFF

ASIABangkokBeijingGurugramHong Kong

JakartaKuala LumpurManilaMumbaiSeoul

ShanghaiSingaporeTaipeiTokyo

Australia2

$A2,025mINCOME

38% OF TOTAL

6,241STAFF

AUSTRALIAAdelaideBrisbaneCanberra

Gold CoastManlyMelbourneParramatta

PerthSydneyNEW ZEALANDAuckland

Americas

$A1,305mINCOME

24% OF TOTAL

2,586STAFF

CANADACalgaryMontrealTorontoVancouverLATIN AMERICAMexico CityRibeirao PretoSao Paulo

USAAustinBoca RatonBostonChicagoDenverHoustonJacksonvilleLos Angeles

MinneapolisNashvilleNew YorkPhiladelphiaSan DiegoSan FranciscoSan Jose

12

• 62% of total income1 in 1H18 was generated offshore

• A 10% movement2 in AUD is estimated to have approx. 6% impact on NPAT

1. Net operating income excluding earnings on capital and other corporate items. 2. This represents an average movement against all major currencies.

Diversification by region


To

tal in

co

me

($

Am

)

-

600

1,200

1,800

2,400

Australia Asia Americas Europe, Middle East & Africa

1H16 2H16 1H17 2H17 1H18

13

MACQUARIE INFRASTRUCTURE

AND REAL ASSETS (MIRA)

MACQUARIE INVESTMENT

MANAGEMENT (MIM)

MACQUARIE SPECIALISED

INVESTMENT SOLUTIONS (MSIS)

• $A79.5b in equity under management, up

3% on Mar 17

• Raised $A6.2b in new equity, including new

commitments for listed and unlisted North

American and Australian infrastructure funds

• Invested equity of over $A5.0b across 7

acquisitions and 13 follow-on investments in 8

countries, including infrastructure in Australia,

US, Spain, UK, Philippines, Korea, India and

Italy and private concessions in Korea

• Equity proceeds from asset divestments2

of over $A4.8b in UK, US, Mexico and Asia

• Performance fees of $A530m from MEIF3,

MQA and other MIRA-managed funds and

co-investors

• Investment-related income included gains on

reclassification of certain infrastructure

investments

• $A11.3b of equity to deploy as at 30 Sep 17

• Ranked No.1 infrastructure manager globally3

• $A325.2b in assets under management,

up 2% on Mar 17, largely due to positive

market movements, partially offset by

unfavourable FX movements

• Strong performance across a range of

asset classes including Australian equities,

Emerging Markets equities and Global and

US Fixed Income

• Distribution highlights include new

institutional mandates and contributions

funded in:

- Australia: $A5.0b

- Asia: $A2.4b

- North America: $US1.2b

- EMEA: $US0.2b

• Launched two new funds in Macquarie

Professional Series, IPM Global Macro Fund

and P/E Global FX Alpha Fund

• Industry awards received include six awards

for Australian equities and four Lipper

Awards4; top 10 global insurance manager5

• Continued to grow the Macquarie

Infrastructure Debt Investment

Solutions (MIDIS) business:

- Closed 6 third party investor

commitments totalling $A1.1b,

bringing total commitments on

MIDIS platform to over $A7.8b

- Closed five investments totalling

$A0.5b in US, UK, France,

Hungary and Australia, bringing

total AUM to over $A5.1b

• Closed $A0.6b in new loans to

Private Equity Secondaries funds and

successfully completed sell down of

$A0.2b underwritten facility

Macquarie Asset Management

Note: Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. Pie chart is based on 1H18 net profit contribution from operating groups. 1. As at 30 Sep 17. 2. Equity proceeds from asset divestments differs to the impact of divestments on reported EUM which captures a reduction of the original capital commitment at time of return of capital to investors. 3. Willis Towers Watson 2017 Global Alternatives Survey, published 17 Jul 17.4. For more information and disclosures about these awards, visit: https://www.macquarieim.com/mimdisclosures. 5. Insurance Investment Outsourcing Report.


%45MAM

NET PROFIT CONTRIBUTION

$A1,189m39%

ON 1H17

75%

ON 2H17

OPERATING INCOME

$A1,730m26%

ON 1H17

41%

ON 2H17

AUM1

$A471.9b 2%

ON MAR 17

14

ASSET FINANCE PRINCIPAL FINANCE1

• Asset Finance portfolio of $A29.9b, up 1% on Mar 17

• Continued to provide tailored finance and asset management

solutions throughout the customer value chain – from

manufacturer to end user: aircraft, vehicles, technology,

healthcare, manufacturing, industrial, energy, rail and

mining equipment

• Vehicles portfolio of $A17.4b, in line with Mar 17

• Aircraft leasing portfolio of $A8.3b, down 2% on Mar 17 due to

asset depreciation in the portfolio and the sale of three aircraft

• Telecoms, Media and Technology - growth in mobile device

finance programmes

• Energy - largest independent2 smart meter funder in UK; and a

specialist funder of energy efficient assets

• Resources - emerging opportunities in fleet replacement after

below trend industry capex

• Integration of small ticket originations and operations

through regional hubs

FUNDING ACTIVITY

• Continued use of diverse funding sources with 30% of the Asset

Finance portfolio funded externally

• Principal Finance’s funded loan portfolio of $A5.6b3, down

18% on Mar 17 due to net repayments and realisations

• $A0.7b of portfolio additions for 1H18 comprising:

- $A0.2b of new primary financings across corporate and real

estate, weighted towards bespoke originations

- $A0.5b of corporate loans and similar assets acquired in the

secondary market

• Notable transactions included:

- Providing £25m of financing to a specialist rehabilitation and

care services company

- Completion of co-acquisition with Macquarie Aviation of a

secondary loan portfolio secured by aviation assets

• Notable realisations included the early repayment of an

investment in one of the UK’s largest private owners of

residential property

• Asset quality remained sound and the portfolio continued to

generate strong overall returns

Corporate and Asset Finance

Note: Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. Pie chart is based on 1H18 net profit contribution from operating groups. 1. CAF Principal Finance formerly known as CAF Lending. 2. Not part of a distribution network or a vertically integrated utility. 3. Includes Real Estate Structured Finance legacy run-off portfolio and equity portfolio of $A0.4b.


%23CAF


$A619m19%

ON 1H17

9%

ON 2H17

OPERATING INCOME

$A931m11%

ON 1H17

7%

ON 2H17

ASSET AND LOAN PORTFOLIO

$A35.5b 3%

ON MAR 17

15

PERSONAL BANKING WEALTH MANAGEMENT BUSINESS BANKING

Provides a full retail banking product suite to

clients with mortgages, credit cards,

transaction and savings accounts. Serves

clients through direct Macquarie offerings, a

white label personal banking platform, strong

intermediary relationships and a leading

digital banking experience.

Provides clients with a wide range of wrap

platform and cash management services,

investment and superannuation products,

financial advice, private banking and

stockbroking. Delivers products and services

through institutional relationships, adviser

networks and dedicated direct relationships

with clients.

Provides a full range of deposit, lending and

payment solutions, as well as tailored

services to business clients, ranging from

sole practitioners to corporate professional

firms, who we engage with through a variety

of channels including dedicated

relationship managers.

Activity

• Australian mortgage portfolio of

$A29.9b, up 4% on Mar 17, representing

approximately 2% of the Australian market

• Named Best Digital Banking Offering

and Most Innovative Card Product at the

2017 Australian Retail Banking Awards

• Launched instant digital rewards program,

Macquarie Rewards

• Announced as strategic partner and issuer

of the new Myer Credit Card

Activity

• Funds on platform1 of $A78.9b, up 9%

on Mar 17

• Wealth accounts added to Macquarie’s

award winning digital banking application

to provide a view of wealth and investment

holdings in the one place

• Expanded Macquarie Wrap managed

accounts offering, with funds under

administration of $A0.8b, up 47% on

Mar 17

• 1H17 included the gain on sale of

Macquarie Life’s risk insurance business to

Zurich Australia Limited

Activity

• Business banking deposit volumes

up 5% on Mar 17

• Business banking loan portfolio of

$A7.1b up 9% on Mar 17

• Total business banking SME clients

up 3% on Mar 17

• Continued rollout of DEFT AuctionPay to

replace the need for cheques at auction

DEPOSITS

• Total BFS deposits2 of $A46.4b, up 4% on Mar 17

− CMA deposits of $A27.4b, up 5% on Mar 17

• Macquarie awarded Best Cash and Term Deposit Accounts at the 2017 SMSF Awards and Core Data SMSF Service Provider Awards

Banking and Financial Services

Note: Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. Pie chart is based on 1H18 net profit contribution from operating groups.1. Funds on platform includes Macquarie Wrap and Vision. 2. BFS deposits exclude corporate/wholesale deposits.


%11BFS


$A286m10%

ON 1H17

13%

ON 2H17

OPERATING INCOME

$A822m6%

ON 1H17

7%

ON 2H17

AUSTRALIAN CLIENT NUMBERS

MORE THAN 1 million

16

Commodity Markets

(Physical & Financial) 42%1

Financial Markets

(Primary & Secondary) 48%1

Futures

10%1

COMMODITY MARKETS

AND FINANCE

FIXED INCOME &

CURRENCIES

CREDIT

MARKETS

CASH EQUITIES

AND EQUITY

DERIVATIVES &

TRADING FUTURES

• Mixed results across the

commodities platform

• Lower volatility impacted client

hedging activity and trading results

in Global Oil, North American Gas

and Metals, partially offset by

stronger results in North American

Power, Bulk Commodities, Investor

Products and Agriculture

• 1H17 benefited from the sale of

equity holdings in energy-related

investments

• Completed the acquisitions of

Cargill Petroleum and Cargill North

America Power and Gas trading

businesses

• Strong result

across the platform

• Increased

client flows in

foreign exchange

and rates,

particularly in

Japan, EMEA

and North America

• Increased

client activity

in Australian

securitisation

• Steady client

activity in bespoke

lending and balance

sheet solutions

• Improved result

across the equities

platform

• Growth in

structured client

capital solutions

• Realisation of

benefits from cost

synergies following

the merger of CFM

and MSG

• No.1 in ANZ for

IPOs and ECM

follow-ons3

• No.1 market share

in listed warrants in

Singapore, No. 2 in

Malaysia, No.5 in

Thailand &

No.8 in Hong Kong4

• Strong results

across the platform

with consistent

client activity and

volumes

• Expansion of Asian

distribution through

Singapore branch

buildout and full

SGX membership

• Maintained strong

position in Australia,

ranked No.2 overall

market share in

ASX24 Futures5

Commodities and Global Markets

Note: Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. Pie chart is based on 1H18 net profit contribution from operating groups. 1. Percentages are based on net profit contribution before impairment charges. 2. Platts Q2 CY17. 3. Dealogic. 4. Net outstanding notional on local exchange. 5. ASX24 Futures volumes CY17 YTD as at 30 Sep 17.


%14CGM


$A378m23%

ON 1H17

21%

ON 2H17

OPERATING INCOME

$A1,321m11%

ON 1H17

10%

ON 2H17

US PHYSICAL GAS MARKETER

in North America2No.2

17

AUSTRALIA AND

NEW ZEALANDASIA AMERICAS EMEA

Activity

• Maintained the leading market

position in M&A2 and ECM3 during

a sustained period of lower deal

volumes

• Executed a number of large, cross-

border and local M&A transactions,

leveraging long-term relationships

• Continued focus on principal asset

creation across Infrastructure and

Green Energy

Notable deals

• Defence advisor to DUET in

response to the $A13.4b acquisition

of 100% of DUET's securities by

Cheung Kong Infrastructure - the

largest M&A deal in Australia

this year4

• Financial advisor to Boral on the

acquisition of Headwaters for

$A3.5b, following being joint lead

manager and underwriter in the prior

year to the associated $A2.1b equity

capital raising, the largest equity

raising in Australia in 20165

Awards/Rankings

• No.1 M&A for completed and

announced deals in ANZ2

• No.1 IPOs and ECM follow-ons

in ANZ3

Activity

• Facilitated cross border capital flows

between China and the rest of

the world

• Increased focus on principal asset

creation across Infrastructure, Green

Energy and Real Estate

Notable deals

• Acquisition of 100% ownership

interest in RES Japan, a Japanese

subsidiary of Renewable Energy

Systems Group, rebranded as

Acacia Renewables and focused on

developing a pipeline of onshore

wind energy projects

• Reached financial close on the

principal acquisition and debt raising

of two waste-to-energy assets in the

cities of Haman and Yeoju,

South Korea

• Joint purchasing agent for open

market purchases by Jardine

Strategic Holdings Limited to acquire

a significant minority shareholding of

Hong Kong listed Greatview Aseptic

Packaging for $HK1.5b

Activity

• Strong sponsor and record high

DCM activity

• Continued focus on principal asset

creation opportunities, realisations of

existing positions, and expansion into

businesses in niche areas

Notable deals

• Financial advisor and equity investor

in the restructuring and acquisition of

the 907MW Norte III combined cycle

gas plant in Juarez, Mexico

• Financial advisor to Waste Industries

on its sale to HPS Investment

Partners and Equity Group

Investments and joint bookrunner

and joint lead arranger on the

$US1.1b senior secured credit

facilities and $US305m senior

secured notes to support the

acquisition

• Joint bookrunner and joint lead

arranger on $US6.2b of senior

secured credit facilities to support the

acquisition of DH Corp by Misys, a

portfolio company of Vista Equity

Activity

• Strong performance across

Infrastructure and Green Energy

• Significant growth in German

Industrials

Notable deals

• Acquisition of the UK Green

Investment Bank plc from HM

Government for £2.3b, rebranded as

Green Investment Group and now

one of Europe’s largest teams of

green energy investment specialists

• Financial advisor to Bain Capital and

Cinven on their €5.4b acquisition of

STADA – the largest private equity

transaction in German M&A history6

• Sole financial and debt adviser to a

consortium on the acquisition of

100% of High Speed 1, the UK's first

high speed rail network7

Awards/Rankings

• No.1 Infra/Project Finance advisory

in EMEA8

• No.1 Project Finance sponsor

in EMEA9

• Most innovative investment bank for

Infrastructure and Project Finance10

Macquarie Capital

Note: Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. Pie chart is based on 1H18 net profit contribution from operating groups. 1. Prior period deal values and transaction numbers have been adjusted to reflect final transaction data. These changes are not material. 2. Dealogic (CY17, any Australian involvement, by number and value). 3. Dealogic (CY17, by value). 4. Dealogic (CY17, by value, completed M&A transactions). 5. Dealogic (FY17, by value). 6. Mergermarket (since 1998, by value). 7. Legal Week. 8. Inframation (CY17, by value). 9. IJGlobal (CY17, by value). 10. The Banker (2017).


%7MACCAP


$A190m7%

ON 1H17

32%

ON 2H17

OPERATING INCOME

$A582m2%

ON 1H17

9%

ON 2H17

152 TRANSACTIONS VALUED AT

$A73bIN 1H18

212 transactions

$A65bIN 1H171

216 transactions

$A97bIN 2H171

18

Term liabilities exceed term assets

These charts represent Macquarie’s funded balance sheets at the respective dates noted above. For details regarding reconciliation of the funded balance sheet to Macquarie’s statutory balance sheet refer to slide 64. 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’ and ‘Equity Investments and PPE’.

4. ‘Cash, liquids and self securitised assets’ includes self securitisation of RBA repo eligible Australian mortgages 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. 8. Total customer deposits as per the funded balance sheet ($A49.4b) differs from total deposits as per the statutory balance sheet ($A59.0b). The funded balance sheet excludes any

deposits which do not represent a funding source for Macquarie. 9. Issuances cover a range of tenors, currencies and product types and are AUD equivalent based on FX rates at the time of issuance and include undrawn facilities.

Funded balance sheet remains strong

30 Sep 17$Ab

TOTAL CUSTOMER DEPOSITS8

$A49.4b 3%FROM MAR 17

NEW TERM FUNDING9

$A8.2b RAISED IN 1H18

SYNDICATED LOAN FACILITIES

$A3.3b REFINANCED IN 1H18


$Ab 31 Mar 17

Equity investmentsand PPE 3,7 (8%)

Loan assets (incl. op lease)

> 1 year6 (33%)


< 1 year5 (11%)

Trading assets

(15%)

Cash, liquids and self

securitised assets 4 (33%)

ST wholesale issued

paper (10%)

Other debt maturing in the

next 12 months 1 (7%)

Customer deposits

(40%)

Debt maturing beyond

12 months 2 (30%)

Equity and hybrids 3

(13%)

ST wholesale issued paper (5%)

Other debt maturing in the

next 12 months 1 (9%)

Customer deposits

(40%)

Debt maturing beyond

12 months 2 (33%)

Equity and hybrids 3

(13%)Equity investmentsand PPE 3,7 (6%)


> 1 year 6 (33%)


< 1 year5 (11%)

Trading assets

(18%)

Cash, liquids and self

securitised assets 4 (32%)

19

Basel III capital position


• APRA Basel III Group capital at Sep 17 of $A18.1b, Group capital surplus of $A4.2b1

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 $A5.6b calculated at 7% RWA, per the internal minimum Tier 1 ratio of the Bank Group. 2. ‘Harmonised’ Basel III estimates are calculated in

accordance with the BCBS Basel III framework. 3. $US250m of Macquarie Exchangeable Capital Securities (“ECS”) bought back in Jun 17. 4. Excluding foreign currency translation reserve. 5. Includes changes in business requirements, for example, Endeavour Energy, Land Services Group and the

acquisition of GIG. Also includes the net impact of hedging employed to reduce the sensitivity of the Group’s capital position to FX translation movements. 6. 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 ($A0.6b); differences in mortgages treatment ($A0.6b); capitalised expenses ($A0.5b); investment into deconsolidated subsidiaries ($A0.2b); DTAs and other impacts ($A0.1b).

7.4

5.86.2 6.2

4.2 4.2

1.2

(0.3)

(1.3) (0.8)

(2.0)

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Harmonised Basel IIIat Mar 17

Hybrid Capital Buyback FY17 Final Dividend andMEREP

1H18 P&L andmovements in reserves

Business growth andother

Harmonised Basel IIIat Sep 17

APRA Basel III'super equivalence'

APRA Basel IIIat Sep 175 64

3

Based on 8.5%

(minimum Tier

1 ratio + CCB)

2

Group regulatory surplus: Basel III (Sep 17)$Ab

20

Strong regulatory ratios


Bank Group (Sep 17)

1. ‘Harmonised’ Basel III estimates are calculated in accordance with the BCBS Basel III framework. 2. Average LCR for Sep 17 quarter is based on an average of daily observations. 3. Includes the capital conservation buffer in the minimum CET1 ratio requirement. The minimum BCBS Basel III leverage ratio requirement of 3% is effective from 1 Jan 18. 4. APRA released final NSFR requirements at the end of 2016. The NSFR and associated changes to APRA ADI Prudential Standard 210 will be effective from 1 Jan 18.

153%

40%

70%

100%

130%

160%

190%

LCR

Bank Group (APRA)

2

11.0%

13.3%

-

3.5%

7.0%

10.5%

14.0%

17.5%

CET1 ratio

6.1%

6.9%

-

1.5%

3.0%

4.5%

6.0%

7.5%

Leverage ratio

Basel III minimum3

Bank Group (Harmonised )1

109%

90%

95%

100%

105%

110%

115%

NSFR4

21

• The Group’s capital position is strong with $A4.2b1 surplus at 30 Sep 17

• To provide additional flexibility to manage the Group’s capital position going forward, the Board has approved an

on-market buyback of up to $A1b, subject to a number of factors including the Group’s surplus capital position,

market conditions and opportunities to deploy capital by the businesses

• This buyback has received the necessary regulatory approvals

Share buyback

1. Calculated at 8.5% RWA including the capital conservation buffer (CCB), per APRA ADI Prudential Standard 110.


22


Interim dividend

1. Shares may be issued if purchasing becomes impractical or inadvisable. The DRP pricing period is from 15 Nov 17 to 21 Nov 17.

1H18 PAYOUT RATIO

56%Dividend policy

remains 60-80%

annual payout

ratio

DRP shares for

the 1H18 dividend

to be sourced

on-market1

1H18 RECORD DATE

8 Nov 171H18 PAYMENT DATE

13 Dec 17

1H18 ORDINARY DIVIDEND

2.05(45% franked)

$A $A1.90in 1H17

from

(45% franked)

$A2.80in 2H17

from

(45% franked)

23

Board and management changes

• Effective 1 Nov 17, Glenn Stevens will be appointed to the Macquarie Group Limited and

Macquarie Bank Limited Boards as an independent director

• Mr Stevens worked at the highest levels of the Reserve Bank of Australia for

20 years, most recently as Governor between 2006 and 2016. He led policy decisions through

the global financial crisis, Australia’s mining boom, and an extended period of low interest rates

and developed Australia’s successful inflation targeting framework for monetary policy

• After 25 years of service, Stephen Allen has announced his intention to retire from his role as

Chief Risk Officer and Head of RMG and will step down from the Executive Committee on

31 Dec 17

• Patrick Upfold, Chief Financial Officer and Head of FMG, will succeed Mr Allen as Chief Risk

Officer and Head of RMG

• Alex Harvey, Global Head of Principal Transactions in Macquarie Capital, will succeed

Mr Upfold as Chief Financial Officer and Head of FMG, and will join the Executive Committee

• Both appointments will be effective 1 Jan 18

Glenn Stevens

Alex Harvey


MACQUARIE 2017

Result Analysis and Financial Management03 Patrick Upfold – Chief Financial Officer


25

1H18 $Am

2H17 $Am

1H17 $Am

Net interest and trading income 1,892 2,069 1,874

Fee and commission income 2,568 2,128 2,203

Net operating lease income 469 445 476

Share of net profits/(losses) of associates

and joint ventures103 59 (8)

Impairments charges (70) (42) (131)

Provisions for credit losses (72) (122) (149)

Other income 507 609 953

Net operating income 5,397 5,146 5,218

Employment expenses (2,261) (2,089) (2,290)

Brokerage, commissions and trading-related expenses

(422) (434) (418)

Other operating expenses (1,010) (1,004) (1,025)

Total operating expenses (3,693) (3,527) (3,733)

Operating profit before tax and non-controlling interests

1,704 1,619 1,485

Income tax expense (448) (430) (438)

Non-controlling interests (8) (22) 3

Profit attributable to MGL shareholders 1,248 1,167 1,050

• Net interest and trading income of $A1,892m, up 1% on 1H17 was mainly driven by:

– Volume growth in BFS loan and deposit portfolios and improved margins

– Reduced cost of holding long-term liquidity in Corporate

Partially offset by:

– reduced interest income from Macquarie Capital’s debt investment portfolio and higher funding costs

associated with the increase in principal investments (including the acquisition of GIG)

– Lower trading income in CGM as a result of lower market volatility

• Fee and commission income of $A2,568m, up 17% on 1H17 largely driven by higher performance fees

in MAM

• Net operating lease income of $A469m, down 1% with improved underlying income in CAF from Aviation,

Energy, and Technology portfolios offset by foreign exchange movements

• Share of net profits/(losses) of associates of $A103m, up from a loss of ($A8m) in 1H17 primarily due to

the improved underlying performance of investments held in Macquarie Capital

• Impairment charges of $A70m, down 47%. 1H17 included impairments in BFS and Macquarie Capital

• Provisions for credit losses of $A72m, down 52% on 1H17 reflecting improved performance of underlying

credit portfolios and reversal of collective provisions in CAF Principal Finance as a result of a reduction in

book size

• Other income of $A507m, down 47% on 1H17 with lower principal gains in Macquarie Capital and CGM,

and the non-recurrence on the gain on sale of Macquarie Life’s risk insurance business in 1H17 by BFS

• Employment expenses of $A2,261m, down 1% on 1H17 driven by lower average headcount and

favourable foreign currency movements, partially offset by higher performance-related profit share

• Other operating expenses of $A1,010m, down 1% on 1H17 due to reduced project activity in BFS and the

realisation of benefits from cost synergies following the merger of CFM and MSG. This was partially offset

by transaction, integration and ongoing costs associated with the GIG acquisition in Macquarie Capital

• Income tax expense of $A448 million increased 2% due to higher profit before tax. Effective tax rate of

26.4% was broadly in line with 2H17 (26.9%), reflecting the geographic mix and nature of earnings

Income Statement key drivers


26

Income Statement by Operating Group


Net

pro

fit

co

ntr

ibu

tio

n (

$A

m)

1,050

332

98

25

(112) (15)

(120) (10)

1,248

-

200

400

600

800

1,000

1,200

1,400

1,600

1H17 NPAT MAM CAF BFS CGM MacCap Corporate (excl.tax expense)

Tax expense 1H18 NPAT

271. Represents movement in net gains on sale and reclassification of debt and equity investments and non-financial assets, share of net profits of associates and joint ventures accounted for using the equity method, and dividend and distribution income.

KEY DRIVERS

• Higher performance fees with 1H18 benefiting from fees from

MEIF3, MQA and other MIRA-managed funds and co-investors

• Underlying base fees up:

– Increased fees as a result of investments made by MIRA-

managed funds, growth in the MSIS Infrastructure Debt

business and positive market movements in MIM AUM

– Partially offset by asset realisations by MIRA-managed funds,

net flow impacts in the MIM business and foreign exchange

• Investment-related income, which includes gains from sale and

reclassification of certain infrastructure investments, and equity

accounted income, broadly in line with 1H17

Macquarie Asset ManagementStrong result; 1H18 benefiting from strong performance fees


857

367

5 (6) (34)

1,189

-

200

400

600

800

1,000

1,200

1,400

1H17 NPC Higher performance fees

Stable base fees Investment-related income

Other 1H18 NPC

$Am5

Underlying

base feesFX impact on

base fees

21 (16)

1

FX impact on base fees

Underlying base fees

28

MAM AUM movement

MIM +$A5b


MIRA ($A12b)2 MSIS ($A1b)3 MAM $A472bMAM $A480b

1. Includes movement in contractual insurance assets. 2. Includes divestment of Thames Water by MIRA-managed funds and ceasing asset services to consortia investors ($A25b). 3. MIDIS increase offset by maturing Australian retail products. 4. MIRA tracks its funds under management using an

EUM measure as base management fee income is typically aligned with EUM. EUM and AUM are calculated under different methodologies and as such, EUM movement is the more relevant metric for analysis purposes – refer to MIRA EUM movement on slide 29. 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. AUM is calculated as proportional enterprise value at measurement date including equity

value and net debt of the underlying assets of funds and managed assets. AUM excludes uninvested equity in MIRA. Refer MD&A s7.1 & 7.2 for further information with respect to EUM and AUM measures.

(6) (12)(1)

1 10

MIRA $A154b MIRA $A142b

MIM $A320b

MIM $A325b

MSIS $A6bMSIS $A5b

-

100

200

300

400

500

600

31 Mar 17 Net flows¹ Market movements FX impacts MIRA movement(see EUM )

MSIS movement 30 Sep 17

$Ab

4

29

MIRA EUM movement


1. Committed capital returned by unlisted funds or under mandates due to asset divestments, redemption or other capital distributions as well as capital no longer managed due to sale of management rights or expiry of asset management agreements. 2. FX reflects the movement in EUM driven by

changes in FX rates. EUM is calculated using capital commitments translated at period end FX rates. Spot FX rates are used for capital raised and returned and average FX rates are used for security price movements.

$Ab

77.2 79.5

(0.3)

(6.7)6.2

2.2

0.9

-

10

20

30

40

50

60

70

80

90

31 Mar 17EUM

Capital raised Acquisition of GIB Listed security pricemovements

Capital returned or no longermanaged¹

FX² 30 Sep 17EUM

Acquisition of GIG

30

KEY DRIVERS

• Increased income from Asset Finance due to improved underlying

contributions from Aviation, Resources and Energy portfolios,

partially offset by unfavourable FX movements. Vehicles

contribution broadly flat

• Increased income from Principal Finance with higher prepayments,

realisations and investment-related income, partially offset by lower

interest income as a result of a reduction in portfolio size

• Lower impairments reflecting net loan repayments (partial reversal

of collective provisions) and improved credit performance of

underlying portfolios

• Other movement largely reflects reduced gains from the sale

of aircraft

Corporate and Asset FinanceHigher Asset Finance and Principal Finance income and lower impairments

$Am


521

22 25

62

(11)

619

-

100

200

300

400

500

600

700

1H17 NPC Higher Asset Financeincome

Higher PrincipalFinance income

Lower impairments Other 1H18 NPC

$Am

311. 1H17 included impairment charge on equity investments ($A15m), intangibles ($A10m) and Core Banking project impairments ($A19m). 2. Income relating to businesses sold in 1H17 which includes the sale of Macquarie Life’s risk insurance business to Zurich Australia Limited, the sale of the US

mortgages portfolio and the continued run down of the Canadian mortgage portfolio.

KEY DRIVERS

• 1H17 impacted by:

– net overall gain on the disposal of Macquarie Life’s risk

insurance business to Zurich Australia Limited and the US

mortgages portfolio

– A change in approach to the capitalisation of software

expenses in relation to the Core Banking platform and non-

recurring technology spend

– Impairment of certain equity positions and impairments of

intangibles relating to the Core Banking platform

• 1H18 experienced lower credit provisions compared to 1H17

• Underlying Business growth in 1H18:

– Average Australian loan portfolio increased 3% on 1H17

driven by average business lending growth of 11% and a 5%

increase in the average Australian mortgages portfolio

– Average BFS deposits volumes increased 11%

– NIM increased across Australian mortgages, business lending

portfolios and BFS deposits

Banking and Financial ServicesStrong business growth across the portfolio


$Am$Am

261

(191)

77

46

24

(10)

79

286

-

50

100

150

200

250

300

350

1H17 NPC Lower net gain ondisposal ofbusinesses

Accelerated andincreased

technology relatedexpenses andother items in

1H17

Lower equity andother

impairments¹

Lower creditprovisions

Reducedunderlying incomefrom businesses

sold²

Business growth 1H18 NPC

32

KEY DRIVERS

• Lower investment-related income with 1H17 benefiting from gains on sale of

a number of investments, mainly in energy and related sectors

• Net interest and trading income (net of associated expenses):

– Commodities:

° Risk management products down $A36m reflecting lower volatility

resulting in reduced client activity and trading opportunities

° Lending and financing down $A34m, largely due to a reduction in

average loan balances in oil and gas sectors due to the wind down of

residual Metals, Energy Capital and other legacy portfolios

° Inventory management, transport and storage in line with 1H17

– Increased interest rates and foreign exchange income underpinned by

strong contributions from FX and interest rate markets in Japan, EMEA,

and North America. Credit remains subdued

– Equities up reflecting improvements in Asia following challenging

conditions in 1H17 and strong demand for structured client capital

solutions

• Lower operating expenses reflecting reduced commodity-related trading

activity, reduced average headcount and associated activity, and realisation

of benefits from cost synergies following the merger of CFM and MSG

• Movement in Other reflects lower equities-related brokerage and

commission fee income largely offset by increased equity accounted income

as a result of improved performance of the underlying portfolio of

investments

Commodities and Global MarketsLower result with 1H17 benefiting from strong investment-related income


$Am

Commodities

490

(129)

(36)

(34) - 14 25

51

(3)

378

-

100

200

300

400

500

600

1H17 NPC LowerInvestment-related

income

Lower Riskmanagement

products

Lower Lending andfinancing

Inventorymanagement,transport andstorage in line

Higher Credit,interest rates and

FX

Higher Equities netinterest and trading

income

Lower operatingexpenses

Other 1H18 NPC

1. Represents movement in net gains on sale and reclassification of debt and equity investments and non-financial assets.

1

331. Includes movements in share of net profits/(losses) of associates and joint ventures accounted for using the equity method, net gains on sale and reclassification of equity and debt investments, net interest and trading income (which represents the interest earned from debt investments and the funding

costs associated with Macquarie Capital’s investments and funding of DCM portfolio), other income and non-controlling interests.

KEY DRIVERS

• Increased fee income:

– M&A: lower fee income in the US and Asia, partially offset by

higher income in Australia

– ECM: reflects subdued conditions in Australia

– DCM: higher fee income in the US due to increased client activity

• Investment-related income (excluding non-controlling interests)

down on 1H17:

– Lower gains on sale of investments

– Decreased net interest reflecting lower interest income from the

debt investment portfolio and higher funding costs for principal

investments (including the acquisition of GIG)

– Partially offset by an increase in equity accounted income as a

result of the improved underlying performance of investments

• Lower impairment charges with 1H17 impacted by a small number

of underperforming principal investments

• Other includes transaction, integration and ongoing costs

associated with the acquisition of GIG and higher operating

expenses from increased principal activity

Macquarie CapitalLower impairments and higher fees offset by lower investment-related income


205

(52)

(6)

76 (83)72

(22)

190

-

50

100

150

200

250

1H17 NPC Lower M&A feeincome

ECM fee incomebroadly in line

Increased DCMfee income

Lower principalincome¹

Lowerimpairments

Other 1H18 NPC

$Am $A18m

Lower

investment-

related

income¹

34

Impairment expense

• Decrease in CAF reflecting net loan repayments

(reversal of collective provisions) and improved credit

performance of underlying portfolios

• Decrease in BFS with 1H17 impacted by the

underperformance of certain equity positions,

impairments of intangibles relating to the Core

Banking platform and higher business lending

provisions on a small number of loans

• Decrease in Macquarie Capital with 1H17 impacted by

a small number of underperforming principal

investments

• Corporate includes impairments relating to legacy

assets

Note: Impairment expense includes collective allowance for credit losses, specific provisions and write-offs, impairment charge on non-financial assets, and impairment charge on investment securities available for sale, interest in associates and joint ventures.

KEY DRIVERS


$Am

280

15

(62)

(70)

5

(72)46

142

-

50

100

150

200

250

300

350

1H17 MAM CAF BFS CGM MacCap Corporate 1H18

35

Regulatory project spend1H18 $Am

2H17$Am

1H17 $Am

Basel III and liquidity 4 7 5

OTC reform 5 13 9

MiFID II 10 5 1

Other Regulatory Projects (e.g. Privacy, Managed Investment) 36 21 24

Sub-total 55 46 39

Business as usual compliance spend

1H18

$Am

2H17

$Am

1H17

$Am

Financial, Regulatory & Tax reporting and Compliance 54 57 58

Compliance policy and oversight 44 38 41

AML Compliance 16 12 12

Regulatory Capital Management 9 9 8

Regulator Levies 8 - 6

Other Compliance functions (e.g. Privacy, Super, Consumer

Protection)34 32 46

Sub-total 165 148 171

Total compliance spend 220 194 210

• The industry continues to see an increase in

regulatory initiatives, resulting in increased

compliance requirements across all levels of the

organisation

• Direct cost of compliance approx. $A220m in 1H18

(excluding indirect costs), up on 1H17

• Project spend has increased during 1H18,

as a result of new projects

Costs of compliance


36

• 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 deposits1 continuing to grow, up 3% to $A49.4b as at Sep 17 from $A47.8b as at Mar 17

• $A8.2b2 of term funding raised during 1H18:

– $A3.3b MGL loan facilities3

– $A2.2b mortgage and motor vehicle/equipment secured funding

– $A1.9b private placement issuance

– $A0.8b MGL secured trade finance facility

Balance sheet highlights

1. Total customer deposits as per the funded balance sheet ($A49.4b) differs from total deposits as per the statutory balance sheet ($A59.0b). The funded balance sheet excludes any deposits which do not represent a funding source for Macquarie. 2. Issuances are AUD equivalent based on FX rates at the time of issuance and represent full facility size. 3. Includes $A3.2b Senior Credit Facility refinance and upsize and $A0.1b addition to the existing MGL Asian Bank Facility refinanced in FY17.


37

-

5

10

15

20

25

30

35

FY14 FY15 FY16 FY17 1H18 <1 yr 1-2yrs 2-3yrs 3-4yrs 4-5yrs >5yrs

Debt Loan Capital Equity & Hybrid AWAS Acquisition Facility Esanda Syndicated Facility

Diversified issuance strategy


Tenor TypeCurrency

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 and Maturities exclude securitisations and

other secured finance. Issuances are converted to AUD at the 30 Sep 17 spot rate. Maturities shown are as at 30 Sep 17.

• Well diversified issuance

and funding sources

• Term funding beyond 1 year

(excluding equity and securitisations)

has a weighted average maturity

of 4.2 years

Term Issuance and Maturity Profile3

Sep 17: Weighted average maturity 4.2 years$Ab

Term funding as at 30 Sep 17 – diversified by currency1, tenor2 and type

Issuances Maturities

Private Placement

6%

Secured Funding

4%

Senior Unsecured35%

Subordinated debt8%

Syndicated loan facility7%

Covered Bonds1%

PUMA RMBS 6%

SMART ABS7%

Equity & Hybrids

26%

AUD45%

USD42%

EUR6%

GBP2%CHF

2%JPY2%OTH1%

1-2yrs14%

2-3yrs14%

3-4yrs11%

4-5yrs6%

>5yrs43%

Securitisations > 1 yr12%

38

• Macquarie has been successful in pursuing its strategy of diversifying its funding sources

through growing its deposit base

– In excess of 1 million BFS clients, of which approx. 560,000 are depositors

– Focus on the composition and quality of the deposit base

– Continue to grow deposits in the CMA product, which has an average account balance of approx. $A45,000

Continued customer deposit growth


Note: Total customer deposits include BFS deposits of $A46.4b and $A3.0b of Corporate/Wholesale deposits.

Customer deposits

31.6 33.9 36.2 36.9 39.7 43.6 47.8 49.4

-

10

20

30

40

50

Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Sep 17

$Ab

39

Operating

Group Category

Sep 17

$Ab

Mar 17

$Ab Description

CAF

Asset Finance2 23.5 22.2

Secured by underlying financed assetsFinance lease assets 13.6 12.2

Operating lease assets 9.9 10.0

Principal Finance3 5.7 6.6Diversified corporate and real estate lending portfolio, predominately consisting of loans which are senior, secured, well

covenanted and with a hold to maturity horizon

Total CAF 29.2 28.8

BFS

Retail Mortgages2,4 25.4 23.5

Secured by residential property and predominately supported by mortgage insuranceAustralia 25.4 23.0

Canada, US and Other - 0.5

Business Banking4 7.7 7.1

Secured relationship managed loan portfolio to professional and financial services firms, real estate industry clients, insurance

premium funding, mortgages to Business Banking clients and other small business clients. Secured largely by real estate,

working capital, business cash flows and credit insurance. The portfolio also includes other retail lending including credit cards

Total BFS 33.1 30.6

CGMResources and commodities 2.6 2.5 Diversified loan portfolio primarily to the resources sector that are secured by the underlying assets

Other 2.3 2.8 Predominately relates to recourse loans to financial institutions, as well as financing for real estate and other sectors

Total CGM 4.9 5.3

MAM Structured investments 2.2 2.0Loans to retail and wholesale counterparties that are secured against equities, investment funds or cash, or are protected

by capital guarantees at maturity

MacCap Corporate and other lending 0.7 0.8 Includes secured corporate lending

Total loan and lease assets per funded balance sheet5 70.1 67.5

Loan and lease portfolios1 – Funded Balance Sheet

1. Loan assets are reported on a funded balance sheet basis and therefore exclude certain items such as assets that are funded by third parties with no recourse to Macquarie. In addition, loan assets at amortised cost per the statutory balance sheet of $A76.9b at 30 Sep 17 ($A76.7b at 31 Mar 17) are adjusted to include fundable assets not classified as loans on a statutory basis (e.g. assets subject to operating leases which are recorded in Property, Plant and Equipment and loans booked in Fair Value through P&L in the statutory balance sheet). 2. Australian Retail Mortgages per the funded balance sheet of $A25.4b differs from the figure disclosed on slide 15 of $A29.9b and Asset Finance per the funded balance sheet of $A23.5b differs from the figure disclosed on slide 14 of $A29.9b. The funded balance sheet nets down loans and funding liabilities of non-recourse securitisation and warehouse vehicles to show the net funding requirement. 3. Principal Finance per the funded balance sheet of $A5.7b includes property and related assets and differs from the figure disclosed on slide 14 of $A5.6b. 4. Securitised business banking portfolio with underlying residential mortgages was included in Retail Mortgages: Australia and has been reclassed to business banking and restated accordingly in Mar 17. 5. Total loan assets per funded balance sheet includes self securitised assets.


40

Category

Carrying value2

Sep 17

$Ab

Carrying value2

Mar 17

$Ab Description

Macquarie Asset Management (MIRA)

managed funds

1.9 1.6 Includes Macquarie Infrastructure Company, Macquarie Atlas Roads, Macquarie SBI

Infrastructure Fund, MPF Holdings Limited, Macquarie Korea Infrastructure Fund, Macquarie

European Infrastructure Fund 4

Investments acquired to seed new MIRA

products and mandates

1.4 0.6 Includes held for sale investments acquired to seed new MIRA products and mandates.

Balance includes a range of investments including Cadent Gas (gas distribution network in

the UK) and other various investments

Other Macquarie managed funds 0.5 0.5 Includes MIM funds as well as investments that hedge directors’ profit share plan liabilities

Transport, industrial and infrastructure 0.9 0.6 Over 35 separate investments, increase includes new investments in the infrastructure sector

in MacCap

Telcos, IT, media and entertainment 0.7 0.6 Over 40 separate investments

Energy, resources and commodities 1.7 0.6 Over 80 separate investments. Increase due to a number of additional investments mainly in

MacCap, which included assets associated with GIG and a combined cycle gas plant

Real estate investment, property and funds

management

0.1 0.1 Over 15 separate investments

Finance, wealth management and

exchanges

0.4 0.4 Includes investments in fund managers, investment companies, securities exchanges and

other corporations in the financial services industry

7.6 5.0

Equity investments of $A7.6b1

1. Equity investments per the statutory balance sheet of $A9.3b (Mar 17: $A7.2b) have been adjusted to reflect the total economic exposure to Macquarie. 2. Total funded equity investments of $A7.7b (Mar 17: $A5.5b), less available for sale and associates’ reserves of $A0.1b (Mar 17: $A0.5b).


41

• Finalisation of Basel III

– The Basel Committee has delayed the finalisation of proposals to amend the calculation of certain risk weighted assets under

Basel III. Any impact on capital will depend upon the final form of the proposals and local implementation by APRA

– APRA has delayed until at least 1 Jan 19 the implementation of a new standardised approach for measuring counterparty credit

risk exposures on derivatives (SA-CCR) and capital requirements for bank exposures to central counterparties

– APRA has also announced that it does not expect to finalise a new market risk standard1 until at least 2020, with

implementation from 2021 at the earliest

• APRA’s ‘Unquestionably Strong’ proposal

– APRA provided guidance around CET1 capital ratios for Australian banks to be considered ‘unquestionably strong’ and intends

to release further details on how the new requirements will be implemented later this year

– APRA has indicated2 that the implementation of the proposal will incorporate changes to the prudential framework resulting

from the finalisation of Basel III

– Based on existing guidance, Macquarie’s surplus capital position remains sufficient to accommodate any additional

requirements

Regulatory update

Note: The Basel Capital Framework applies to the Bank Group only. 1. Also known as the Fundamental Review of the Trading Book. 2. APRA’s information paper published Jul 17: ‘Strengthening banking system resilience – establishing unquestionably strong capital ratios’.


42

Bank Group Basel III Common Equity Tier 1 (CET1) Ratio


• APRA Basel III CET1 ratio: 11.0%1

• Harmonised Basel III CET1 ratio: 13.3%2

1. Basel III applies only to the Bank Group and not the Non-Bank Group. APRA Basel III Tier 1 ratio at Sep 17: 12.9%. APRA Basel III CET1 ratio at Mar 17: 11.1%. 2. ‘Harmonised’ Basel III estimates are calculated in accordance with the BCBS Basel III framework. Harmonised Basel III Tier 1 ratio at

Sep 17: 15.2%. 3. Excluding foreign currency translation reserve. 4. Includes changes in business requirements and the net impact of hedging employed to reduce the sensitivity of the Group’s capital position to FX translation movements. 5. 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 differences in the treatment of mortgages (0.9%); equity investments (0.5%); capitalised expenses (0.5%); investment into deconsolidated subsidiaries (0.2%); DTAs

and other impacts (0.2%).

12.7% 12.7% 13.3%

11.1%

13.3% 13.3%

11.0%

0.6%

0.1%

(0.7%)(2.3%)

0%

2%

4%

6%

8%

10%

12%

14%

Harmonised Basel IIIat Mar 17

FY17 MBL to MGL Dividend 1H18 P&L and movementsin reserves

Other Harmonised Basel IIIat Sep 17

APRA Basel III'super equivalence'

APRA Basel IIIat Sep 17

CCB (2.5%)Basel III minimum CET1 (4.5%)

Bank Group Common Equity Tier 1 Ratio: Basel III (Sep 17)

3

4

5

43

• 153% average LCR for Sep 17 quarter, based on daily observations

– Maintained well above regulatory minimums

– Includes APRA approved AUD CLF allocation of $A5.0b for 2017 calendar year

• Reflects long-standing conservative approach to liquidity management

• $A30.1b of unencumbered liquid assets and cash on average over the quarter to Sep 17 (post applicable haircuts)

1. Unencumbered Liquid Asset Portfolio represents the quarterly average of these balances.

Strong liquidity position maintained

Unencumbered Liquid Asset Portfolio1 MBL LCR position


168% 163% 153%

0%

50%

100%

150%

200%

Mar 17 Qtr Jun 17 Qtr Sep 17 Qtr

Regulatory

Minimum

13.8 12.7 13.5

2.8 2.8 3.9

5.0 5.0 5.0

7.9 8.0 7.7

Mar 17 Qtr Jun 17 Qtr Sep 17 Qtr

HQLA Available Cash CLF Surplus CLF Collateral

$A29.5b $A28.5b$A30.1b

44

• Share purchases since 31 Mar 17

- FY17 MEREP $A373m was purchased – $A260m off-market under the staff sale arrangements and $A113m

on-market, with a combined weighted average price of $A89.25

• Following the issuance of $US750m MACS hybrid capital in Mar 17, MBL (London Branch) completed a $US250m

buyback of ECS hybrid capital in Jun 17. ECS were delisted from the SGX on 22 Jun 17

• The Board has resolved that no discount will apply for the 1H18 DRP and the shares are to be acquired

on-market1

• To provide additional flexibility to manage the Group’s capital position going forward, the Board has approved an

on-market buyback of up to $A1b, subject to a number of factors including the Group’s surplus capital position,

market conditions and opportunities to deploy capital by the businesses

Capital management update

1. Shares may be issued if purchasing becomes impractical or inadvisable. The DRP pricing period is from 15 Nov 17 to 21 Nov 17.


MACQUARIE 2017

Outlook04 Nicholas Moore – Managing Director and Chief Executive Officer


46

FY18 combined net profit contribution from operating groups expected to be slightly up on FY17

Factors impacting short-term outlook

Note: Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. Pie chart is based on FY17 net profit contribution from operating groups.



• FY17: $A1.2b up 6% on FY16

• Leasing book broadly in line

• Reduced loan volumes in Principal Finance

• Timing and level of early prepayments and realisations

in Principal Finance


• FY17: $A1.5b down 6% on FY16

• Base fees expected to be broadly in line

• 2H18 performance fees expected to be lower than 1H18


• FY17: $A0.5b up 47% on FY16

• Higher loan portfolio, deposit and platform volumes

Annuity-style businesses Capital markets facing businesses

Macquarie Capital

• FY17: $A0.5b up 7% on FY16

• Assume market conditions broadly consistent with

1H18

• Solid pipeline of Principal realisations expected

• GIG acquisition completed


• FY17: $A1.0b up 15% on FY16

• Strong customer base expected to drive consistent

flow across Commodities, Fixed Income and Futures;

albeit subdued market conditions in Commodities

• Lower levels of impairments and investment-related

income expected

• Cargill acquisitions completed

Corporate

• Compensation ratio to be consistent with historical levels

• Based on present mix of income, currently expect FY18 tax rate to be broadly

in line with 1H18

CGM

MacCap

BFS

CAF

MAM

FY17

47

• We currently expect the FY18 combined net profit contribution1 from operating groups to be slightly up on FY17

• The FY18 tax rate is currently expected to be broadly in line with 1H18

• Given substantial performance fees were recognised in 1H18, we expect the 2H18 result to be down on 1H18

and broadly in line with 2H17

• Accordingly, the Group’s result for FY18 is currently expected to be slightly up on FY17

• Our short-term outlook remains subject to:

– Market conditions

– The impact of foreign exchange

– Potential regulatory changes and tax uncertainties

Short-term outlook

1. Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax.


48

• 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 recent acquisitions

– Macquarie Asset Management, Corporate and Asset Finance and Banking and Financial Services

– Two capital 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

Medium-term


49

Approximate business Basel III Capital & ROE


Operating GroupAPRA Basel III Capital

1

@ 8.5% ($Ab)Approx. 1H18 Return

on Ordinary Equity2

Approx. 11-Year Average

Return on Ordinary Equity2

Annuity-style businesses 8.6

Macquarie Asset Management 2.0

28% 20%3Corporate and Asset Finance 4.2

Banking and Financial Services 2.4

Capital markets facing businesses 5.3

Commodities and Global Markets 3.011% 15% - 20%

Macquarie Capital 2.3

Total regulatory capital requirement @ 8.5% 13.9

Group surplus 4.2

Total APRA Basel III capital supply 18.14

1. Business Group capital allocations are indicative and are based on allocations as at 30 Jun 17 adjusted for material movements over the Sep 17 quarter. 2. NPAT used in the calculation of approx. annualised ROE is based on operating group’s 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. 11-year average covers FY07 to FY17, inclusively. 3. CAF returns prior to FY11 are excluded from the 11-year average as they are not meaningful given the significant increase in scale of CAF’s platform over this period. 4. Comprising of $A15.4b of ordinary equity and $A2.7b of hybrids.

As at 30 Sep 17

50

Medium-term

Macquarie Asset Management (MAM)

• Annuity-style business that is diversified across regions, products, asset classes and investor types

• Diversification of capabilities allows for the business to be well placed to grow assets under management in different market conditions

• Well positioned for organic growth with several strongly performing products and an efficient operating platform

Corporate and Asset Finance (CAF)

• Leverage deep industry expertise to maximise growth potential in asset and loan portfolio

• Positioned for further asset acquisitions and realisations, subject to market conditions

• Funding from asset securitisation throughout the cycle

Banking and Financial Services (BFS)

• Strong growth opportunities through intermediary and direct retail client distribution, white labelling, 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

Commodities and Global Markets (CGM)

• Opportunities to grow commodities business, both organically and through acquisition

• Development of institutional coverage for specialised credit, rates and foreign exchange products

• Increase financing activities

• Growing the client base across all regions

• Well positioned for a recovery in equity markets activity by 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 region

Annuity-

style

businesses

Capital

markets

facing

businesses



27 October 2017


MACQUARIE 2017

Detailed result commentaryAAPPENDIX


53

1. Includes net gains on sale and reclassification of debt and equity investments and non-financial assets, share of net profits of associates and joint ventures accounted for using the equity method, and dividend and distribution income. 2. Management accounting profit before unallocated corporate

costs, profit share and income tax.

1H18 $Am

2H17 $Am

1H17 $Am

Base fees 795 784 790

Performance fees 537 94 170

Other fee and commission income 114 124 105

Investment and other income1 284 221 308


Brokerage, commission and

trading-related expenses(123) (103) (97)

Other operating expenses (420) (438) (419)

Total operating expenses (543) (541) (516)

Non-controlling interests 2 (1) -

Net profit contribution2 1,189 681 857

AUM ($Ab) 471.9 480.0 491.3

Headcount 1,581 1,559 1,517

• Base fees of $A795m, broadly in line with 1H17

– Underlying base fees up on 1H17 as a result of investments made by MIRA-managed

funds, growth in the MSIS Infrastructure Debt business and positive market movements

in MIM AUM

– Partially offset by asset realisations by MIRA-managed funds, net flow impacts in the

MIM business and foreign exchange impacts

• Performance fees of $A537m, up on 1H17

– 1H18 included performance fees from MEIF3, MQA and other MIRA-managed funds and

co-investors

– 1H17 included performance fees from MQA, MKIF, Australian managed accounts and

from co-investors in respect of infrastructure assets

• Other fee and commission income of $A114m, up 9% on 1H17 due to higher fees from

MSIS Retail and True Index income

• Investment and other income of $A284m

– Investment-related income, which includes gains from sale and reclassification of certain

infrastructure investments, and equity accounted income, broadly in line with 1H17

• Total operating expenses of $A543m, up 5% on 1H17 driven by higher brokerage and

commission expense in MSIS Retail


Result


54

1. Includes internal net interest expense and transfer pricing on funding provided by Group Treasury that is eliminated on consolidation in the Group’s statutory P&L. 2. Includes investment and loan impairments. 3. Management accounting profit before unallocated corporate costs, profit share and

income tax. 4. Includes equity portfolio of $A0.4b (FY17: $A0.4b).

1H18 $Am

2H17 $Am

1H17 $Am

Net interest and trading income1 336 358 354

Net operating lease income 465 437 467

Impairments and provisions2 1 (50) (61)

Fee and commission income 22 32 21


Net operating income 931 996 835


Non-controlling interests - - 1

Net profit contribution3 619 677 521

Loan and finance lease portfolio4 ($Ab) 25.6 26.5 28.1

Operating lease portfolio ($Ab) 9.9 10.0 10.0

Headcount 1,263 1,258 1,347

• Net interest and trading income of $A336m, down 5% on 1H17

– Reduction in Principal Finance portfolio size, partially offset by increased income from

prepayments and realisation of loan assets

• Net operating lease income of $A465m, broadly in line with 1H17

• Impairments and provisions down on 1H17 due to impact of loan repayments and

improvement in underlying portfolios

• Other income of $A107m up 98% on 1H17

– 1H18 includes a gain on reclassification of an asset held in the Principal Finance

business, partially offset by reduced gains on sale of aircraft in 1H18 compared

to 1H17

– Prior period included a gain realised on the sale a US toll road by the Principal

Finance business

• Total operating expenses of $A312m broadly in line with 1H17


Result


55

1. Includes internal net interest expense and transfer pricing on funding provided by Group Treasury and deposit premium paid to BFS by Group Treasury for the generation of deposits, that are eliminated on consolidation in the Group’s statutory P&L. 2. Includes investment and loan impairments.

3. Management accounting profit before unallocated corporate costs, profit share and income tax. 4. Funds on platform includes Macquarie Wrap and Vision. 5. The Australian loan portfolio comprises residential mortgages, loans to Australian businesses, insurance premium funding and credit

cards. 6. The legacy loan portfolios primarily comprise residential mortgages in Canada and the US. 7. BFS deposits excludes corporate/wholesale deposits.

1H18 $Am

2H17 $Am

1H17 $Am

Net interest and trading income1 584 551 498


Wealth management fee income 168 154 159

Banking fee income 66 62 70

Life insurance income - - 27

Net gain on disposal of businesses 1 - 192

Impairments and provisions2 (8) (13) (78)





Funds on platform4 ($Ab) 78.9 72.2 62.1

Australian loan portfolio5 ($Ab) 37.6 35.8 35.6

Legacy loan portfolio6 ($Ab) - 0.5 0.6

BFS deposits7 ($Ab) 46.4 44.5 42.2

Headcount 2,077 1,992 1,959

• Net interest and trading income of $A584m, up 17% on 1H17

– Increased average balances of the Australian loan and deposit portfolios: average

business lending up 11%, average Australian mortgages up 5% and average deposit

volumes up 11% on 1H17

– Improved lending and deposit margins

• Fee and commission income of $A234m, down 9% on 1H17

– Wealth management income up 6% due to increase in funds on the Wrap and Vision

platforms following the migrations of full service broking accounts and ANZ Oasis Wrap

superannuation and investment assets

– Decrease in Life insurance income following the sale of Macquarie Life’s risk insurance

business in Sep 16

• Net gain on disposal of businesses of $A1m down from $A192m in 1H17 which benefited

from the sale of Macquarie Life’s risk insurance business to Zurich Australia Limited, partially

offset by losses on the sale of US mortgages portfolio

• Impairments and provisions of $A8m, down on 1H17

– 1H17 impacted by the underperformance of certain equity positions, impairments of

intangibles relating to the Core Banking platform and higher business lending provisions on

a small number of loans

• Total operating expenses of $A536m, down 13% on 1H17 which was impacted by elevated

project activity and a change in approach to the capitalisation of software expenses in

relation to the Core Banking platform


Result


561. Includes internal net interest expense and transfer pricing on funding provided by Group Treasury that is eliminated on consolidation in the Group’s statutory P&L. 2. Includes investment and loan impairments. 3. Management accounting profit before unallocated corporate costs, profit share and

income tax.

1H18 $Am

2H17 $Am

1H17 $Am

Commodities1 435 627 505

Risk management products 285 427 321

Lending and financing 108 118 142

Inventory management, transport and storage 42 82 42

Credit, interest rates and foreign exchange1 283 352 269

Equities 186 146 161


Investment and other income 37 26 154



Brokerage, commission and trading-related expenses (190) (218) (205)

Other operating expenses (753) (764) (789)


Non-controlling interests - - (1)


Headcount 1,986 1,888 1,922

• Commodities income of $A435m, down 14% on 1H17

– Risk management products down 11% on 1H17 reflecting lower volatility resulting in

reduced client activity and trading opportunities

– Lending and financing down 24% on 1H17 largely due to a reduction in average loan

balances in the oil and gas sectors due to the wind down of residual Metals, Energy

Capital and other legacy portfolios

– Inventory management, transport and storage in line with 1H17

• Credit, interest rate and foreign exchange income of $A283m, up 5% on 1H17

– Strong contributions from foreign exchange and interest rates markets in Japan, EMEA,

and North America. Credit remains subdued

• Equities up 16% on 1H17 reflecting improvements in Asia following challenging conditions

in 1H17 and strong demand for structured client capital solutions

• Fee and commission income of $A436m broadly in line with 1H17

• Investment and other income down on a strong 1H17 which included gains on the sale of a

number of investments in energy and related sectors

• Impairments and provisions of $A56m, broadly in line with 1H17

• Total operating expenses of $A943m, down 5% on 1H17 reflecting reduced commodity-

related trading activity, reduced average headcount and associated activity, and realisation

of benefits from cost synergies following the merger of CFM and MSG


Result


57

1. Includes internal net interest expense and transfer pricing on funding provided by Group Treasury that is eliminated on consolidation in the Group’s statutory P&L. 2. Includes investment and loan impairments. 3. Internal revenue allocations are eliminated on consolidation in the Group’s statutory P&L.

4. Management accounting profit before unallocated corporate costs, profit share and income tax. 5. Prior period deal values and transaction numbers have been adjusted to reflect final transaction data. These changes are not material.

1H18 $Am

2H17 $Am

1H17 $Am


Principal Income (ex Non-controlling interests) 165 175 235

Investment and other income 222 183 224

Net interest and trading income1 (57) (8) 11


Internal management revenue3 1 (4) 10



Non-controlling interests (2) (12) 11


Capital markets activity5:

Number of transactions 152 216 212

Transactions value ($Ab) 73 97 65

Headcount 1,177 1,136 1,149

• Increased fee income:

– M&A: lower fee income in the US and Asia, partially offset by higher income in Australia

– ECM: reflects subdued conditions in Australia

– DCM: higher fee income in the US due to increased client activity

• Investment-related income (excluding non-controlling interests) down on 1H17:

– Lower gains on sale of investments

– Decreased net interest reflecting lower interest income from the debt investment portfolio

and higher funding costs for principal investments (including the acquisition of GIG)

– Partially offset by an increase in equity accounted income as a result of the improved

underlying performance of investments

• Lower impairment charges with 1H17 impacted by a small number of underperforming

principal investments

• Operating expenses increased, reflecting transaction, integration and ongoing costs

associated with the acquisition of GIG and higher operating expenses from increased

principal activity

Macquarie Capital

Result


MACQUARIE 2017

Additional information – FundingBAPPENDIX


59

• 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 Macquarie Bank Group

• MGL provides funding predominately to the Non-Bank Group

Macquarie funding structure


Non-Bank Group

Debt and Equity Debt and Equity

Equity

Macquarie Bank Limited

(MBL)

Bank Group

Debt and

Hybrid Equity

Debt and

Hybrid Equity

Non-Bank Subsidiaries

Macquarie Group Limited

(MGL)

60

• 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 17

$Ab

Mar 17

$Ab

Sep 16

$Ab

Total assets per Statement of Financial Position 189.8 182.9 193.1

Accounting deductions:

Self funded trading assets (20.1) (14.6) (21.1)

Derivative revaluation accounting gross-ups (10.4) (10.7) (12.5)

Life investment contracts and other segregated assets (9.0) (9.6) (9.4)

Outstanding trade settlement balances (7.5) (6.6) (7.0)

Short-term working capital assets (6.2) (5.8) (7.0)

Non-controlling interests (1.4) (1.3) (0.1)

Less non-recourse funded assets:

Securitised assets and non-recourse funding (11.3) (13.5) (13.7)

Total assets per Funded Balance Sheet 123.9 120.8 122.3

For an explanation of the above deductions refer to slide 64.

Funded balance sheet reconciliation


611. Sep 17 includes ordinary capital and Macquarie Income Securities of $A0.4b. 2. Non-controlling interests have been netted in the funded balance sheet. 3. As at 30 Sep 17. 4. Includes drawn term funding facilities only.

Sep 17

$Ab

Mar 17

$Ab

Sep 16

$Ab

Funding sources

Certificates of deposits 0.8 0.9 0.5

Commercial paper 11.6 5.7 6.8

Net trade creditors 2.0 2.4 -

Structured notes 2.6 3.1 3.7

Secured funding 4.5 4.6 4.7

Bonds 27.5 29.3 34.6

Other loans 0.5 0.5 0.7

Syndicated loan facilities 3.9 4.8 4.9

Customer deposits 49.4 47.8 46.1

Loan capital 5.4 5.7 4.9

Equity and hybrids1,2 15.7 16.0 15.4

Total funding sources 123.9 120.8 122.3

Funded assets

Cash and liquid assets 24.6 21.7 20.4

Self-securitisation 16.7 16.5 15.4

Net trading assets 18.1 22.1 23.8

Loan assets including operating lease assets less than one year 13.8 13.9 14.9

Loan assets including operating lease assets greater than one year 39.6 37.1 37.9

Debt investment securities 1.7 2.3 2.7

Co-investment in Macquarie-managed funds and other

equity investments2 7.7 5.5 5.2

Property, plant & equipment and intangibles 1.7 1.7 1.6

Net trade debtors - - 0.4

Total funded assets 123.9 120.8 122.3

• Well diversified funding sources

• Minimal reliance on short-term wholesale funding markets

• Deposit base represents 40%3 of total funding sources

• Term funding beyond one year (excluding equity and securitisations)

has a weighted average term to maturity of 4.2 years3

Macquarie term funding maturing beyond one year

(includes equity and hybrid)4

Funding for Macquarie


$Ab

621. Includes ordinary capital and Macquarie Income Securities of $A0.4b. 2. As at 30 Sep 17. 3. Includes drawn term funding facilities only.

Sep 17

$Ab

Mar 17

$Ab

Sep 16

$Ab

Funding sources

Certificates of deposit 0.8 0.9 0.5

Commercial paper 11.6 5.7 6.8

Net trade creditors 1.2 1.6 0.5



Bonds 20.9 21.7 26.1



Customer deposits 49.4 47.8 46.1

Loan capital 4.2 4.6 3.8

Equity and hybrids1 12.6 12.6 12.5


Funded assets


Self-securitisation 16.7 16.5 15.4


Loan assets including operating lease assets less than one year 13.3 13.6 14.4

Loan assets including operating lease assets greater than one year 39.0 36.1 37.1


Non-Bank Group deposit with MBL (4.2) (6.7) (5.2)


equity investments0.8 0.8 0.8



• 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 4.2 years2

• Accessed term funding in markets including US, Europe and Australia

as well as opening new markets

Bank Group term funding maturing beyond one year


Funding for the Bank Group

$Ab


63

Sep 17

$Ab

Mar 17

$Ab

Sep 16

$Ab

Funding sources

Net trade creditors 0.8 0.8 -



Bonds 6.6 7.6 8.5



Loan capital1 1.2 1.1 1.1

Equity2 3.1 3.4 2.9


Funded assets


Non-Bank Group deposit with MBL 4.2 6.7 5.2


Loan assets less than one year 0.6 0.3 0.5

Loan assets greater than one year 0.5 1.0 0.8



equity investments2 6.9 4.7 4.4


Net trade debtors - - 0.9


• Non-Bank Group is predominately term funded

• Term funding beyond one year (excluding equity) has a weighted

average term to maturity of 4.4 years3

Non-Bank Group term funding maturing beyond one year


Funding for the Non-Bank Group

$Ab

1. Macquarie Group Capital Notes 1 & 2 of $A1.2b. 2. Non-controlling interests have been netted in the funded balance sheet. 3. As at 30 Sep 17. 4. Includes drawn term funding facilities only.


64

• 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.

• Life investment contracts and other segregated assets: 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. The netted amount

excludes Macquarie Income Securities which are included in Equity and hybrids in the funded balance sheet.

• Securitised and other non-recourse assets: 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.

Explanation of Funded Balance Sheetreconciling items


65

Liquidity Policy

• The key requirement of MGL and MBL’s liquidity policies 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 ensures 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 their respective liquidity policy and are provided with liquidity reporting on a monthly basis

Conservative long standing liquidity risk management framework


MACQUARIE 2017

Additional information – CapitalCAPPENDIX


67

Surplus calculation

30 Sep 17

Harmonised

Basel III

$Am

APRA

Basel III

$Am

Macquarie eligible capital:

Bank Group Gross Tier 1 capital 13,845 13,845

Non-Bank Group eligible capital 4,303 4,303

Eligible capital 18,148 18,148 (a)

Macquarie capital requirement:

Bank Group capital requirement

Risk-Weighted Assets (RWA)1 86,886 88,880

Capital required to cover RWA2 7,385 7,555

Tier 1 deductions 549 2,327

Total Bank Group capital requirement 7,934 9,882

Total Non-Bank Group capital requirement 4,038 4,038

Total Macquarie capital requirement (at 8.5%2 of the Bank Group RWA) 11,972 13,920 (b)

Macquarie regulatory capital surplus (at 8.5%2 of the Bank Group RWA) 6,176 4,228 (a)-(b)

Macquarie Basel III regulatory capital

1. In calculating the Bank Group’s contribution to Macquarie’s capital requirement, $A745m RWA associated with exposures to the Non-Bank Group are eliminated. 2. Calculated at 8.5% RWA including capital conservation buffer (CCB), per APRA ADI Prudential Standard 110.


68

Bank Group contribution

Macquarie APRA Basel III regulatory capital


30 Sep 17

Risk-weighted assets

$Am

Tier 1 Deductions

$Am

Capital Requirement1

$Am

Credit risk

On balance sheet 58,840 5,001

Off balance sheet 16,701 1,420

Credit risk total2 75,541 6,421

Market risk 3,314 282

Operational risk 10,025 852

Interest rate risk in the banking book - -

Tier 1 deductions 2,327 2,327

Contribution to Group capital calculation2 88,880 2,327 9,882

1. Calculated at 8.5% RWA including capital conservation buffer (CCB), per APRA ADI Prudential Standard 110. 2. In calculating the Bank Group’s contribution to Macquarie’s capital requirement, $A745m RWA associated with exposures to the Non-Bank Group are eliminated.

69

Macquarie regulatory capital


• APRA has specified a regulatory capital framework for Macquarie

• A dollar capital surplus is produced; no capital ratio calculation is specified

• APRA has approved Macquarie’s Economic Capital Adequacy Model (ECAM) for use in calculating the regulatory capital requirement

of the Non-Bank Group

• Any significant changes to the ECAM must be approved by the MGL Board and notified to APRA within 14 days

• The ECAM is based on similar principles and models as the Basel III regulatory capital framework for Banks, with both calculating

capital at a one year 99.9% confidence level:

Risk1 Basel III ECAM

Credit Capital requirement generally determined by Basel III IRB

formula, with some parameters specified by the regulator (e.g.

loss given default)

Capital requirement generally determined by Basel III IRB

formula, but with internal estimates of key parameters

Equity Harmonised Basel III: 250%, 300% or 400% risk weight,

depending on the type of investment2. Deduction from Common

Equity Tier 1 above a threshold

APRA Basel III: 100% Common Equity Tier 1 deduction

Extension of Basel III credit model to cover equity exposures.

Capital requirement between 36% and 82% of face value;

average 47%

Market 3 times 10 day 99% Value at Risk (VaR) plus 3 times 10-day 99%

Stressed VaR plus a specific risk charge

Scenario-based approach

Operational Advanced Measurement Approach Advanced Measurement Approach

1. The ECAM also covers insurance underwriting risk, non-traded interest rate risk and the risk on assets held as part of business operations, including: fixed assets, goodwill, intangible assets and capitalised expenses. 2. Includes all Banking Book equity investments, plus net long

Trading Book holdings in financial institutions.

Non-Bank Group contribution

70

Macquarie regulatory capital


Non-Bank Group contribution

1. Includes leases. 2. Capital associated with net trading assets (including market risk capital) and net trade debtors has been included here.

30 Sep 17Assets

$Ab

Capital Requirement

$AmEquivalent

Risk Weight

Funded assets

Cash and liquid assets 1.8 22 15%

Loan assets1 1.1 117 132%

Debt investment securities 0.3 85 356%

Co-investment in Macquarie-managed funds and other equity investments 6.6 2,715 518%

Co-investment in Macquarie-managed funds and other equity investments (relating to investments that hedge DPS plan liabilities) 0.3

Property, plant & equipment and intangibles 1.0 275 344%

Non-Bank Group deposit with MBL 4.2

Net trading assets 0.7

Total funded assets 16.0 3,214

Self-funded and non-recourse assets

Self funded trading assets 0.3

Outstanding trade settlement balances 3.2

Derivative revaluation accounting gross ups 0.0

Short-term working capital assets 3.8

Non-controlling interests 1.4

Total self-funded and non-recourse assets 8.7

Total Non-Bank Group assets 24.7

Off balance sheet exposures, operational, market and other risks, and diversification offset2 824

Non-Bank Group capital requirement 4,038

MACQUARIE 2017

GlossaryCAPPENDIX


72

Glossary

$A / AUD Australian Dollar

$C / CAD Canadian Dollar

$US / USD United States Dollar

£ / GBP Pound Sterling

¥ / JPY Japanese Yen

€ Euro

1H17 Half-Year ended 30 September 2016

1H18 Half-Year ended 30 September 2017

2H16 Half-Year ended 31 March 2016

2H17 Half-Year ended 31 March 2017

ABN Australian Business Number

ADI Authorised Deposit-Taking Institution

AML Anti-Money Laundering

ANZ Australia and New Zealand

Approx. Approximately

APRA Australian Prudential Regulation Authority

APTT Asian Pay Television Trust

ASX Australian Stock Exchange

AUM Assets under Management

AVS Available For Sale

BCBS Basel Committee on Banking Supervision

BFS Banking and Financial Services

CAF Corporate and Asset Finance

Capex Capital Expenditure

CCB Capital Conservation Buffer

CCP Central Counterparty

CET1 Common Equity Tier 1

CFM Commodities and Financial Markets

CGM Commodities and Global Markets

CHF Swiss Franc

CLF Committed Liquid Facility

CMA Cash Management Account

CMBS Commercial Mortgage-Backed Securities

CRM Customer Relationship Management

CY16 Calendar Year ended 31 December 2016

CY17 Calendar Year ending 31 December 2017

DCM Debt Capital Markets

DPS Dividends Per Share

DRP Dividend Reinvestment Plan

DTA Deferred Tax Asset


73

Glossary

ECAM Economic Capital Adequacy Model

ECM Equity Capital Markets

ECS Exchangeable Capital Securities

EMEA Europe, the Middle East and Africa

EPS Earnings Per Share

EUM Equity Under Management

FSI Financial System Inquiry

FMG Financial Management Group

FX Foreign Exchange

FY07 Full Year ended 31 March 2007









FY18 Full Year ending 31 March 2018

GIGGreen Investment Group (rebranded from Green

Investment Bank)

HK Hong Kong Dollar

HQLA Highly Quality Liquid Assets

IPO Initial Public Offering

IRB Internal Ratings-Based

IT Information Technology

JV Joint Venture

LBO Leveraged Buyout

LCR Liquidity Coverage Ratio

LNG Liquefied Natural Gas

LP Limited Partner

Ltd Limited

M&A Mergers and Acquisitions

MacCap Macquarie Capital

MACS Macquarie Additional Capital Securities

MAM Macquarie Asset Management

MBL Macquarie Bank Limited

MD&A Management Discussion & Analysis

MEC Metals and Energy Capital

MEIF1 Macquarie European Infrastructure Fund 1

MEIF3 Macquarie European Infrastructure Fund 3

MEREP Macquarie Group Employee Retained Equity Plan


74

Glossary

MGL / MQG Macquarie Group Limited

MIC Macquarie Infrastructure Corporation

MIDIS Macquarie Infrastructure Debt Investment Solutions

MIM Macquarie Investment Management

MIRA Macquarie Infrastructure and Real Assets

MKIF Macquarie Korea Infrastructure Fund

MPW Macquarie Private Wealth

MQA Macquarie Atlas Roads

MSG Macquarie Securities Group

MSIS Macquarie Specialised Investment Solutions

MW Mega Watt

NGLs Natural gas liquids

NIM Net Interest Margin

No. Number

NPAT Net Profit After Tax

NPC Net Profit Contribution

NSFR Net Stable Funding Ratio

OTC Over-The-Counter

P&L Profit and Loss Statement

PCP Prior Corresponding Period

PPE Property, Plant and Equipment

PPP Public Private Partnership

RBA Reserve Bank of Australia

REIT Real Estate Investment Trust

RMG Risk Management Group

ROE Return on Equity

RWA Risk Weighted Assets

SBI State Bank of India

SGX Singapore Exchange

SME Small and Medium Enterprise

SMSF Self Managed Super Fund

TMET Telecommunications, Media, Entertainment and Technology

UK United Kingdom

US United States of America

VaR Value at Risk

VWAP Volume Weighted Average Price

yr Year



27 October 2017


presentation to investors and analysts€¦ · note: net profit contribution is management...

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