Sydney, 30 July 2020
Macquarie Group (ASX: MQG; ADR: MQBKY) today provided an update on the first quarter of its 2021 financial year (1Q21) ahead of its 2020 Annual General Meeting, held virtually. Macquarie Group Managing Director and Chief Executive Officer, Shemara Wikramanayake, said Macquarie’s Operating Groups were impacted by mixed trading conditions, with their contribution in 1Q21 slightly down on the first quarter of the 2020 financial year (1Q20).
Speaking ahead of Macquarie’s 2020 Annual General Meeting, Ms Wikramanayake said, “Macquarie’s annuity-style businesses were up on 1Q20 with Macquarie Asset Management (MAM) up primarily due to the sale of its rail operating lease business, partially offset by lower income in Banking and Financial Services (BFS) which included higher provisions. Macquarie’s markets-facing businesses were down on 1Q20 primarily due to significantly lower investment-related income in Macquarie Capital (MacCap), partially offset by stronger contributions from certain divisions in Commodities and Global Markets (CGM).”
Macquarie Group’s financial position comfortably exceeds the Australian Prudential Regulation Authority’s (APRA) Basel III regulatory requirements, with a Group capital surplus of $A8.1 billion at 30 June 2020, up from $A7.1 billion at 31 March 2020. The Bank Group APRA Basel III Common Equity Tier 1 capital ratio was 13.2 per cent (Harmonised: 16.3 per cent) at 30 June 2020, up from 12.2 per cent at 31 March 2020. The Bank Group’s APRA leverage ratio was 6.0 per cent (Harmonised: 6.6 per cent), LCR was 189 per cent and NSFR was 118 per cent at 30 June 2020.
As previous disclosed, Macquarie issued a total of 5,024,608 Macquarie ordinary shares pursuant to the Macquarie Group Employee Retained Equity Plan (MEREP) in June 2020. The shares were issued and allocated at $A112.153 per share.
In commenting on the Group’s start to the 2021 financial year (FY21), Ms Wikramanayake noted the following highlights:
Market conditions are likely to remain challenging, especially given the significant and unprecedented uncertainty caused by the worldwide impact of COVID-19 and the uncertain speed of the global economic recovery. The extent to which these conditions will impact overall FY21 profitability is uncertain, making short-term forecasting extremely difficult. Accordingly, Macquarie is currently unable to provide meaningful earnings guidance on the Group’s result for FY21.
The range of factors that will influence the short-term outlook include:
Macquarie continues to maintain a cautious stance, with a conservative approach to capital, funding and liquidity that positions the Group well to respond to the current environment.
Ms Wikramanayake said, “Macquarie remains well positioned to deliver superior performance in the medium term due to its deep expertise in major markets; strength in business and geographic diversity and ability to adapt its portfolio mix to changing market conditions; ongoing programs to identify cost saving initiatives and efficiency; strong and conservative balance sheet; and proven risk management framework and culture.”
In providing an overview of FY20, Macquarie Group Chairman, Peter Warne, acknowledged the COVID-19 pandemic, first and foremost a global public health crisis with profound economic consequences for many countries and communities.
Mr Warne spoke about Macquarie addressing the immediate needs of clients, communities, portfolio businesses and staff in addition to its ongoing commitment to stakeholders, including shareholders.
“More than 98 per cent of Macquarie staff have been working remotely and were well equipped to do so given flexible working was already well-embedded in our work practices. The Group is now in a gradual, phased and voluntary return to office in certain locations where it is safe to do so, and with the appropriate social distancing and hygiene measures in place.”
“As clients respond to the pandemic, Macquarie has been there to support them. For example, a range of financial assistance measures have been available to personal banking, leasing and business banking clients. Financial hardship assistance has been enhanced to help vulnerable customers. And as clients have navigated market disruption arising from COVID-19, Macquarie has been there to provide expertise, advice and financing solutions.”
Mr Warne reiterated the importance of risk culture and conduct, with the Board’s key oversight role to ensure that Macquarie’s culture is aligned with risk appetite, and acknowledged that while COVID-19 has resulted in different ways of working, Macquarie’s risk approach and focus has remained constant throughout this period, with increased levels of senior management communications to staff to remind them of ongoing expectations and responsibilities.
The Board and Management also recognises the importance of sound environmental, social and corporate governance practices as part of Macquarie’s responsibility to clients, shareholders, communities and the environment in which it operates. Mr Warne noted, “As the Board and Management reviewed business activities over FY20, we noted the ever-increasing number of transactions, investments, financings and developments in both developed and developing countries that are contributing to lower emissions. These activities cover reduced emissions across energy, agriculture, transportation and real estate.”
Macquarie is in part characterised by the diversity of its business mix and geography and these attributes have contributed to the Group’s growth and profitability for more than 50 years. Mr Warne noted the types of initiatives undertaken include working with schools and universities to promote financial services as a fulfilling career path for women, ensuring diversity of recruitment in intern and graduate programs, embedding flexible work practices which have been embraced by a range of demographics within our staff population, and employee network groups.
Mr Warne commented on the activities of Macquarie staff and the Macquarie Group Foundation across the various communities in which it operates. “FY20 and the first few months of the current financial year have been busier than usual for the Macquarie Group Foundation. At the beginning of FY21, the Foundation was allocated an additional $A20 million to support non-profits working to combat COVID-19 and provide relief to affected communities. To date, $A9.3 million has been directed to a range of institutions to provide direct relief through bolstering food security, providing access to health services and medical supplies, and providing vital information to support refugee communities, migrant domestic workers, low-income families and a range of other vulnerable groups affected by COVID-19 around the world, and to provide public health and clinical research.”
Mr Warne also commented on the rearticulation of Macquarie’s purpose statement noting, “In FY20, and with the CEO’s sponsorship, Macquarie teams consulted extensively with colleagues and external stakeholders, and analysed the outcomes achieved for clients and communities. This work was distilled into a clear purpose statement that resonates with staff today. ‘Empowering people to innovate and invest for a better future’ encapsulates what Macquarie sets out to do every day.”
Finally, Mr Warne acknowledged the service of Gary Banks AO who is retiring at the conclusion of the AGM. Mr Warne said, “Gary has been a board member since 2013 and has fulfilled his responsibilities diligently, with valuable insight and with great enthusiasm for the organisation. Gary is a collaborative colleague and, on a personal note, I have valued his thorough and thoughtful approach.”
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