Macquarie : 2024 half year result management discussion and analysis

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 2023, 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 2023 and is current as at 3 November 2023.

Cover image

Supporting the development of Carbon Capture and Storage (CCS) projects forms a key part of CGM's focus on accelerating the energy transition. We first invested in Storegga in 2020, which is helping scale up a range of carbon capture technologies, including the Acorn CCS project that has recently entered Track-2 of the UK Government's CCS Cluster Sequencing Process. Acorn will be a major contributor in meeting the UK and Scotland's carbon reduction targets, aiming to store 20 million tonnes per year (Mtpa) of CO2

in its first decade of operation.

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 2022.

References to the prior period are to the six months ended 31 March 2023.

References to the current period and current half year are to the six months ended 30 September 2023.

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 2023, which was subject to independent review by PricewaterhouseCoopers.

PricewaterhouseCoopers' independent auditor's review report

to the members of Macquarie Group Limited dated 3 November 2023 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) and is general background information about MGL 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.

Other than Macquarie Bank Limited ABN 46 008 583 542 (MBL), any Macquarie group entity noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). That entity's obligations do not represent deposits or other liabilities of MBL and MBL does not guarantee or otherwise provide assurance in respect of the obligations of that entity. Any investments are subject to investment risk including possible delays in repayment and loss of income and principal invested.

Contents

01		02
Result Overview		Financial Performance
		Analysis
1.1 Executive Summary	4	2.1 Net Interest and Trading Income	12
		2.2 Fee and Commission Income	15
		2.3 Share of Net Profits/(Losses) from	17
		Associates and Joint Ventures
		2.4 Credit and Other Impairment	18
		Reversals/(Charges)
		2.5 Net Other Operating Income	20
		2.6 Operating Expenses	21
		2.7 Headcount	22
		2.8 Income Tax Expense	23

06		07
Capital		Funds Management
6.1 Overview	72	7.1 Assets Under Management	82
6.2 Bank Group Capital	74	7.2 Equity Under Management	83
6.3 Non-Bank Group Capital	77

03		04
Segment Analysis		Balance Sheet
3.1	Basis of Preparation	26	4.1 Statement of Financial Position	44
3.2 MAM	30	4.2 Loan Assets	46
3.3 BFS	32	4.3 Equity Investments	48
3.4 CGM	34
3.5	Macquarie Capital	37
3.6 Corporate	39
3.7	International Income	41

08 09

Glossary

Ten Year History

05

Funding and Liquidity

5.1	Liquidity Risk Governance and	52
Management Framework
5.2 Management of Liquidity Risk	54
5.3 Funded Balance Sheet	56
5.4	Funding Profile for Macquarie	58
5.5	Funding Profile for the Bank Group	62
5.6	Funding Profile for the Non-Bank	66
Group
5.7 Explanatory Notes Concerning	68
Funding Sources and Funded Assets

8.1 Glossary

86

9.1 Ten Year History

94

2

Result	Financial	Segment	Balance	Funding and		Funds		Ten Year
Performance	Capital	Glossary
Overview	Analysis	Analysis	Sheet	Liquidity	Management	History

Macquarie Group Limited 2024 Management Discussion and Analysis

3

1.1 Executive Summary

1H24 net profit

$A1,415m

• 39%on pcp

1H24 annualised return on equity

8.7%

• from 15.6% in the pcp

1H24 net operating income

1H24 operating expenses

$A7,910m

$A5,919m

â

á

8% on pcp

6% on pcp

1

1H24 net profit contribution1

Annuity-style activities	Markets-facing activities
$A1,296m	$A1,562m
â 43%				â
on pcp				32% on pcp

• Net profit contribution is management accounting profit before unallocated corporate items, profit share and income tax.

4

Result	Financial	Segment	Balance	Funding and		Funds		Ten Year
Performance	Capital	Glossary
Overview	Analysis	Analysis	Sheet	Liquidity	Management	History

1H24 net profit contribution by Operating Group

Summary of the Operating Groups' performance for the half year ended 30 September 2023.

Non-Banking Group

Annuity-style businesses

Macquarie Asset Management (MAM)

$A407m

• 71% on pcp due to

• decreased net income on equity, debt and other investments driven by the timing of asset realisations in green investments
• increased net interest and trading expense primarily driven by higher funding costs due to an increase in interest rates and investments.

Partially offset by:

• reversal of an impairment previously recognised on a green equity investment.

Markets-facing businesses

Macquarie Capital

$A430m

• 28% on pcp due to

• the non-recurrence of material asset realisations in the Americas and Europe.

Partially offset by:

• gains on a small number of investments
• higher net interest income from the private credit portfolio, benefitting from $A3.8 billion of growth in average drawn loan assets
• non-recurrenceof mark-to-market losses on certain debt underwriting positions
• reversal of impairments recognised on a small number of previously underperforming investments
• lower origination credit provisions on the private credit portfolio due to lower deployment in the current period.

Banking Group

Banking and Financial Services (BFS)

$A638m

á10% on pcp due to

• higher net interest and trading income mainly driven by growth in the loan portfolio and BFS deposits, and improved average margins from the rising interest rate environment, partially offset by changes in portfolio mix and ongoing lending competition
• higher fee income due to increased administration fees from higher average funds on platform and lending and transaction volumes.

Partially offset by:

• higher credit impairment charges driven by portfolio growth
• higher expenses driven by increased headcount and technology investment to support business growth and regulatory requirements, as well as inflationary pressure.

Commodities and Global Markets (CGM)1

$A1,383m

• 31%on pcp due to

• decreased risk management revenue across the platform, particularly from Resources, and EMEA Gas, Power and Emissions due to decreased client hedging and trading activity as volatility and price movements stabilised across commodity markets following record highs in the prior corresponding period, partially offset by an increased contribution across Agricultural markets
• higher operating expenses driven by higher employment, technology platform and infrastructure, compliance and regulatory management spend, and the impact of unfavourable foreign exchange movements.

Partially offset by:

• higher fee and commission income due to increased activity in futures and risk premia products.

Corporate

Net expenses of $A1,443m

• 36%

on pcp due to

• increased net interest and trading income, primarily driven by an increase in earnings on capital reflecting higher central bank interest rates and average volumes, and the deployment of the Group's previously elevated centrally held liquidity and funding surplus by the Operating Groups. This was partially offset by accounting volatility from the changes in the fair value of economic hedges
• reduced operating expenses driven by lower profit share expense as a result of the performance of the Consolidated Entity
• reduced income tax expense as a result of the performance of the Consolidated Entity, partially offset by higher effective tax rate mainly driven by the geographic composition and nature of earnings.

1 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.

Macquarie Group Limited 2024 Management Discussion and Analysis

5

1.1 Executive Summary

Continued

Profit attributable to the ordinary equity holders

$A1,415m

â 39% on pcp

		HALF YEAR TO		MOVEMENT
	Sep 23	Mar 23	Sep 22	Mar 23	Sep 22
	$Am	$Am	$Am	%	%
Financial performance summary
Net interest income	1,633	1,597	1,431	2	14
Fee and commission income	3,119	3,472	3,055	(10)	2
Net trading income	2,546	4,756	2,739	(46)	(7)
Share of net losses from associates and joint
ventures	(5)	(52)	(61)	(90)	(92)
Net credit impairment charges	(6)	(213)	(175)	(97)	(97)
Net other impairment reversals/(charges)	123	45	(111)	173	*
Net other operating income	500	893	1,746	(44)	(71)
Net operating income	7,910	10,498	8,624	(25)	(8)
Employment expenses	(3,734)	(4,090)	(3,613)	(9)	3
Brokerage, commission and fee expenses	(529)	(528)	(500)	<1	6
Non-salary technology expenses	(594)	(547)	(545)	9	9
Other operating expenses	(1,062)	(1,369)	(938)	(22)	13
Total operating expenses	(5,919)	(6,534)	(5,596)	(9)	6
Operating profit before income tax	1,991	3,964	3,028	(50)	(34)
Income tax expense	(587)	(1,089)	(735)	(46)	(20)
Profit after income tax	1,404	2,875	2,293	(51)	(39)
Loss attributable to non-controlling interests	11	2	12	*	(8)
Profit attributable to ordinary equity
holders of Macquarie Group Limited	1,415	2,877	2,305	(51)	(39)

Key metrics

Expense to income ratio (%) Compensation ratio (%) Effective tax rate (%)

Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Dividend per ordinary share (cents per share) Ordinary dividend payout ratio (%) Annualised return on equity (%)

74.8	62.2	64.9
44.3	36.6	39.8
29.3	27.5	24.2
369.2	746.0	603.3
366.2	725.5	585.1
255.0	450.0	300.0
70	60	50
8.7	18.1	15.6

6