Macquarie Group
Management Discussion and Analysis
Half year ended 30 September 2021
Macquarie Group Limited ACN 122 169 279
Notice to readers
The purpose of this report is to provide information supplementary to the Macquarie Group Limited Interim Financial Report (the Financial Report) for the half year ended 30 September 2021, including further detail in relation to key elements of Macquarie Group Limited and its subsidiaries' (Macquarie, the Consolidated Entity) financial performance and financial position. The report also outlines the funding and capital profile of the Consolidated Entity.
Certain financial information in this report is prepared on a different basis to that contained in the Financial Report, which is prepared in accordance with Australian Accounting Standards. Where financial information presented within this report does not comply with Australian Accounting Standards, a reconciliation to the statutory information
is provided.
Date of this report
This report has been prepared for the half year ended
30 September 2021 and is current as at 29 October 2021.
Cover image
Since 2012, Macquarie Asset Management's Private Credit team has invested approximately €2.7 billion across more than 39 renewable energy projects, with a total installed capacity of 15 GW, including this parabolic trough solar plant in Andalusia in southern Spain.
Explanatory notes
Comparative information and conventions
Where necessary, comparative figures have been restated to conform to changes in current year financial presentation and group structures.
References to the prior corresponding period (pcp) are to the six months ended 30 September 2020.
References to the prior period are to the six months ended 31 March 2021.
References to the current period and current half year are to the six months ended 30 September 2021.
In the financial tables throughout this document '*' indicates that the absolute percentage change in the balance was greater than 300% or indicates the result was a gain in one period but a loss in another, or vice versa.
Independent Auditor's Review Report
This document should be read in conjunction with the Financial Report for the half year ended 30 September 2021, which was subject to independent review by PricewaterhouseCoopers.
PricewaterhouseCoopers' independent auditor's review report to the members of Macquarie Group Limited dated 29 October 2021 was unqualified.
Any additional financial information in this document which is not included in the Financial Report was not subject to independent review by PricewaterhouseCoopers.
Disclaimer
The material in this document has been prepared by Macquarie Group Limited ABN 94 122 169 279 (MGL, the Company) and is general background information about Macquarie Group Limited and its subsidiaries' (Macquarie) activities current as at the date of this document. This information is given in summary form and does not purport to be complete. The material in this document may include information derived from publicly available sources that have not been independently verified. Information in this document should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities or other financial products or instruments and does not take into account your particular investment objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information having regard to these matters, any relevant offer document and in particular, you should seek independent financial advice. No representation or warranty is made as to the accuracy, completeness or reliability of the information. All securities and financial product or instrument transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk.
This document may contain forward looking statements - that is, statements related to future, not past, events or other matters - including, without limitation, statements regarding our intent, belief or current expectations with respect to Macquarie's businesses and operations, market conditions, results of operation and financial condition, capital adequacy, provisions for impairments and risk management practices. Readers are cautioned not to place undue reliance on these forward looking statements. Macquarie does not undertake any obligation to publicly release the result of any revisions to these forward looking statements or to otherwise update any forward looking statements, whether as a result of new information, future events or otherwise, after the date of this document. Actual results may vary in a materially positive or negative manner. Forward looking statements and hypothetical examples are subject to uncertainty and contingencies outside Macquarie's control. Past performance is not a reliable indication of future performance.
Contents
01 | 02 | ||
Result Overview | Financial Performance | ||
Analysis | |||
1.1 Executive Summary | 8 2.1 Net Interest and Trading Income 16 | ||
2.2 | Fee and Commission Income | 19 | |
2.3 | Net Operating Lease Income | 21 | |
2.4 | Share of Net Profits/(Losses) | ||
from Associates and | |||
Joint Ventures | 21 | ||
2.5 | Credit and Other | ||
Impairment Charges | 22 | ||
2.6 | Net Other Operating Income | 24 | |
2.7 | Operating Expenses | 25 | |
2.8 | Headcount | 26 | |
2.9 | Income Tax Expense | 27 |
06 | 07 | ||||
Capital | Funds Management | ||||
6.1 | Overview | 74 | 7.1 | Assets Under Management | 84 |
6.2 | Bank Group Capital | 76 | 7.2 | Equity Under Management | 85 |
6.3 | Non-Bank Group Capital | 79 |
4
Macquarie Group Limited 2022 Management Discussion and Analysis
03 | 04 | 05 | ||||
Segment Analysis | Balance Sheet | Funding and Liquidity | ||||
3.1 | Basis of Preparation | 30 | 4.1 Statement of Financial Position | 48 5.1 | Liquidity Risk Governance | |
3.2 | MAM | 34 | 4.2 Loan Assets | 50 | and Management Framework | 56 |
5.2 | Management of Liquidity Risk | 58 | ||||
3.3 | BFS | 36 | 4.3 Equity Investments | 52 | ||
3.4 | CGM | 38 | 5.3 | Funded Balance Sheet | 60 | |
3.5 | Macquarie Capital | 41 | 5.4 | Funding Profile for Macquarie | 62 | |
3.6 | Corporate | 43 | 5.5 | Funding Profile for the | ||
Bank Group | 66 | |||||
3.7 | International Income | 45 | 5.6 | Funding Profile for the | ||
Non-Bank Group | 69 | |||||
5.7 | Explanatory Notes | |||||
Concerning Funding Sources | ||||||
and Funded Assets | 71 |
08 | 09 | |
Glossary | Ten Year History | |
8.1 Glossary | 88 9.1 Ten Year History | 96 |
5
6
Macquarie Group Limited 2022 Management Discussion and Analysis
01
Result Overview
Overview | Result |
Performance Analysis | Financial |
Analysis | Segment |
Balance Sheet | |
Funding and Liquidity | |
Capital | |
Management | Funds |
Glossary | |
Ten Year History |
7
1.1 Executive Summary
1H22 net profit
$A2,043m
µµ107% on pcp
1H22 net operating income
$A7,804m
µµ41% on pcp
1H22 net profit contribution(1) by activity
Annuity-style activities
1H22 annualised return on equity
17.8%
µµfrom 9.5% in the pcp
1H22 operating expenses
$A5,069m
µµ19% on pcp
Markets-facing activities
$A2,517m $A1,467m
µµ57% on pcp | µµ118% on pcp |
~63% ~37%
Macquarie Asset | Banking and | Commodities and Global Markets |
Management | Financial Services | ~18% ~25% |
~33% | ~12% | |
Macquarie Capital | ||
~12% |
(1) Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax.
8
Macquarie Group Limited 2022 Management Discussion and Analysis
1H22 net profit contribution by Operating Group
Summary of the Operating Groups' performance for the half year ended 30 September 2021.
Result Overview |
Non-Banking Group
Banking Group
Annuity-style businesses
Macquarie Asset Management (MAM)
$A1,305m
µµ23% on pcp
- Increased other fee and commission income largely due to the disposition fee from Macquarie Infrastructure Corporation (MIC)
- Increased base fees primarily driven by the acquisition of Waddell & Reed Financial, Inc. (Waddell & Reed), investments made by Private Markets-managed funds and mandates and Public Investments market movements
- Increased share of net profits from associates and joint ventures, primarily driven by equity accounted income from MIC and increased Macquarie AirFinance income compared to the prior corresponding period, which included the impact of COVID-19
- Decreased credit and other impairment charges driven by a reversal of the impairment previously recognised on MAM's investment in MIC.
Partially offset by:
- increased operating expenses driven by Waddell & Reed one-off acquisition and ongoing costs
- decreased net income on equity, debt and other investments driven by the sale of Macquarie European Rail in the prior corresponding period
- decreased performance fees following a strong prior corresponding period.
Banking and Financial Services (BFS)
$A482m
µµ52% on pcp
- Higher net interest and trading income driven by volume growth in the loan portfolio and BFS deposits
- Decreased credit impairment charges driven by an improvement in expected macroeconomic conditions compared to the prior corresponding period
- Decreased brokerage, commission and fee expenses largely due to the cessation of grandfathered commission payments to third party advisors in line with legislation.
Partially offset by:
- higher employment and technology expenses, including increased headcount, to support business growth.
Markets-facing businesses
Macquarie Capital
$A468m
µµsignificantly on pcp
- Higher net income on equity, debt and other investments driven by higher revenue from asset realisations predominantly in Europe, in the business services and technology sectors
- Higher fee and commission income due to higher mergers and acquisitions fee income and debt capital markets fee income, partially offset by lower equity capital markets fee income
- Higher net interest and trading income resulting from growth in the Principal Finance debt portfolio, and lower funding costs compared to the prior corresponding period
- Higher other income reflecting gains on sale of green energy projects
- Lower operating expenses predominantly driven by lower employment costs.
Partially offset by:
- higher credit and other impairment charges primarily due to a small number of underperforming equity investments and growth of the debt portfolio
- higher non-controlling interests predominantly driven by share of gains on disposal attributable to non-controlling interests.
Commodities and Global Markets(1) (CGM)
$A1,729m
µµ60% on pcp
- Increased risk management products income reflecting strong results across all sectors particularly from Gas and Power, Resources, and Agriculture due to increased client hedging activity and gains associated with management of those exposures as a result of elevated levels of volatility and price movements in commodity markets
- Net income on equity, debt and other investments up significantly driven by the gain on the partial sale of the UK Meters portfolio of assets, comprising the industrial and commercial portfolio
- Decreased credit and other impairment charges due to an improvement in expected global macroeconomic conditions.
Partially offset by:
- lower inventory management and trading income included strong trading gains from supply and demand imbalances in Gas and Power that were more than offset by the impact of timing of income recognition, primarily on storage contracts and transport agreements
- lower fee and commission income due to a reduction in fees associated with structured deals in asset finance which occur on an intermittent basis.
Performance Analysis | Financial |
Analysis | Segment |
Balance Sheet | |
Funding and Liquidity | |
Capital | |
Management | Funds |
Glossary | |
Ten Year History |
- Certain assets of the Credit Markets business, certain activities of the Commodity Markets and Finance business, and some other less financially significant activities are undertaken from within the Non-Banking Group.
9
1.1 Executive Summary
Continued
Profit attributable to the ordinary equity holders
$A2,043m
µµ107% on pcp
HALF YEAR TO | MOVEMENT | ||||
Sep 21 | Mar 21 | Sep 20 | Mar 21 | Sep 20 | |
$Am | $Am | $Am | % | % | |
Financial performance summary | |||||
Net interest income | 1,373 | 1,162 | 1,033 | 18 | 33 |
Fee and commission income | 3,452 | 2,563 | 2,613 | 35 | 32 |
Net trading income | 1,659 | 1,995 | 1,487 | (17) | 12 |
Net operating lease income | 186 | 221 | 245 | (16) | (24) |
Share of net profits/(losses) from associates and joint ventures | 242 | 51 | (54) | * | * |
Net credit impairment charges | (176) | (27) | (407) | * | (57) |
Net other impairment charges | (54) | (50) | (40) | 8 | 35 |
Net other operating income | 1,122 | 1,340 | 642 | (16) | 75 |
Net operating income | 7,804 | 7,255 | 5,519 | 8 | 41 |
Employment expenses | (3,164) | (2,902) | (2,615) | 9 | 21 |
Brokerage, commission and fee expenses | (498) | (408) | (471) | 22 | 6 |
Non-salary technology expenses | (417) | (386) | (395) | 8 | 6 |
Other operating expenses | (990) | (905) | (785) | 9 | 26 |
Total operating expenses | (5,069) | (4,601) | (4,266) | 10 | 19 |
Operating profit before income tax | 2,735 | 2,654 | 1,253 | 3 | 118 |
Income tax expense | (603) | (624) | (275) | (3) | 119 |
Profit after income tax | 2,132 | 2,030 | 978 | 5 | 118 |
(Profit)/loss attributable to non-controlling interests | (89) | - | 7 | * | * |
Profit attributable to ordinary equity holders | |||||
of Macquarie Group Limited | 2,043 | 2,030 | 985 | 1 | 107 |
Key Metrics | |||||
Expense to income ratio (%) | 65.0 | 63.4 | 77.3 | ||
Compensation ratio (%) | 38.5 | 38.0 | 44.0 | ||
Effective tax rate (%) | 22.8 | 23.5 | 21.8 | ||
Basic earnings per share (cents per share) | 562.5 | 565.2 | 276.7 | ||
Diluted earnings per share (cents per share) | 545.4 | 546.0 | 272.9 | ||
Dividend per ordinary share (cents per share) | 272.0 | 335.0 | 135.0 | ||
Ordinary dividend payout ratio (%)(1) | 50 | 60 | 50 | ||
Annualised return on equity (%) | 17.8 | 19.0 | 9.5 | ||
- The ordinary dividend payout ratio for the half year ended 30 September 2021 is calculated as the estimated number of eligible shares on the record date multiplied by the dividend per share, divided by the profit attributable to MGL shareholders.
10
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Macquarie Group Ltd. published this content on 20 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 June 2024 11:06:02 UTC.