Sydney, 17 February 2015
Macquarie Group Limited (Macquarie) (ASX: MQG; ADR: MQBKY) today provided an update on business activity in the third quarter of the financial year ending 31 March 2015 (December 2014 quarter) and updated the outlook for the financial year ending 31 March 2015 (FY15).
During a presentation at Macquarie’s Operational Briefing in Sydney today, Macquarie Group Managing Director and Chief Executive Officer Nicholas Moore said: "Since our result announcement for the first half of the 2015 financial year (1H15), trading conditions across the Group have continued to improve and there has been a continued weakening of the Australian dollar.
"Macquarie’s annuity-style businesses’ - Macquarie Asset Management (formerly Macquarie Funds Group), Corporate and Asset Finance and Banking and Financial Services – combined December 2014 quarter net profit contribution1 was down on both a strong December 2013 quarter and September 2014 quarter which benefited from significant performance fees in Macquarie Asset Management and the sale of OzForex2.
"Macquarie’s capital markets facing businesses - Macquarie Securities, Macquarie Capital and Commodities and Financial Markets (formerly Fixed Income, Currencies and Commodities) - experienced improved trading conditions with combined December 2014 quarter net profit contribution1 up significantly on both the December 2013 quarter and September 2014 quarter."
Also announced today, Macquarie Funds Group has changed its name to Macquarie Asset Management. Similarly, Fixed Income, Currencies and Commodities has changed its name to Commodities and Financial Markets. This is to better align the names of these groups to their business activities.
Mr Moore provided an overview of recent developments undertaken by the businesses during the December 2014 quarter:
Capital, funding and balance sheet positions
Macquarie Group remains well capitalised with APRA Basel III Group capital of $A14.3 billion at 31 December 2014, a $A1.4 billion surplus to Macquarie’s minimum regulatory capital requirements from 1 January 20163, and a $A2.6 billion surplus to Macquarie’s existing4 minimum regulatory capital requirements. The Bank Group APRA Basel III Common Equity Tier 1 capital ratio was 9.0 per cent at 31 December 2014, which was up from 8.7 per cent at 30 September 2014.
The funded balance sheet remains strong and well funded with wholesale and retail deposits of $A38.8 billion at 31 December 2014 in line with 30 September 2014.
While the impact of future market conditions makes forecasting difficult, we expect the FY15 combined net profit contribution1 from operating groups to be up significantly on FY14, more than offsetting the FY14 realised gain relating to the Sydney Airport distribution.
The FY15 tax rate is currently expected to be slightly down on FY14.
Accordingly, as we advised the market in January 2015, the Group’s result for FY15 is expected to be up between 10 and 20 per cent on FY14, with current conditions likely to result in this being at the upper end of the range, subject to the completion rate of transactions and the conduct of period end reviews.
Our short term outlook remains subject to a range of challenges including: market conditions; the impact of foreign exchange; the cost of our continued conservative approach to funding and capital; and potential regulatory changes and tax uncertainties.
Macquarie remains well positioned to deliver superior performance in the medium term, due to its deep expertise in major markets, strength in diversity and ability to adapt its portfolio mix to changing market conditions, the ongoing benefits of continued cost initiatives, a strong and conservative balance sheet, and a proven risk management framework and culture.
1. Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax.
2. OzForex sold in December 2013 quarter.
3. Calculated at 8.5 per cent risk weighted assets (RWA) including capital conservation buffer (CCB), per the 1 January 2016 minimum requirements in the APRA Prudential Standard APS 110.
4. Calculated at 7.0 per cent RWA, per the internal minimum Tier 1 ratio of the Bank Group.
5. Dealogic, calendar year 2014.
6. Local exchange by turnover.
7. Platts, September 2014 quarter.