Sydney, 08 February 2022
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 2022 (3Q22).
During a presentation at Macquarie’s annual Operational Briefing in Sydney today, Macquarie Group Managing Director and Chief Executive Officer, Shemara Wikramanayake, said: “Improved overall market conditions have resulted in a record quarter for the Group.”
The annuity-style businesses’ combined 3Q22 net profit contribution was down on 3Q21, mainly due to the timing of performance fees and investment-related income. For FY22 YTD, net profit contribution was up on FY21 YTD, mainly due to continued volume growth in BFS. MAM’s contribution was broadly in line, driven by income from MIC and higher base fees, partially offset by the gain on sale of Macquarie European Rail in the pcp and lower performance fees.
The markets-facing businesses’ combined 3Q22 net profit contribution was substantially up on 3Q21. For FY22 YTD, net profit contribution was substantially up on FY21 YTD. This was primarily due to higher principal income in Macquarie Capital, including exceptionally strong investment realisations in the infrastructure (including green energy), business services and technology sectors. CGM’s contribution included strong commodities income, partially offset by the timing of income recognition on storage contracts and transport agreements, as well as the gain on the partial sale of the UK Meters portfolio of assets.
Macquarie Group’s financial position comfortably exceeds APRA’s Basel III regulatory requirements, with a Group capital surplus of $A11.5 billion2,3 at 31 December 2021, up from $A8.4 billion at 30 September 2021. The Bank Group’s APRA Basel III Common Equity Tier 1 capital ratio was 12.2 per cent (Harmonised: 15.4 per cent4) at 31 December 2021, up from 11.7 per cent at 30 September 2021. The Bank Group’s APRA leverage ratio was 5.1 per cent (Harmonised: 5.8 per cent4), the Liquidity Coverage Ratio (LCR) was 177 per cent5 and the Net Stable Funding Ratio (NSFR) was 121 per cent5 at 31 December 2021.
Ms Wikramanayake provided an overview of business activity undertaken during 3Q22:
MAM had assets under management (AUM) of $A750.1 billion at 31 December 2021, up two per cent on 30 September 2021. In the quarter, Public Investments AUM rose two per cent to $A522.5 billion, driven by positive impacts from market movements, partially offset by foreign exchange and net flows. Private Markets AUM rose three per cent to $A227.6 billion, driven by fund investments, partially offset by divestments. At 31 December 2021, Private Markets had equity under management of $A160.1 billion with $A24.0 billion to deploy after raising $A8.1 billion in new equity, investing $A7.5 billion and divesting $A1.0 billion.
BFS had total deposits6 of $A91.6 billion at 31 December 2021, up four per cent on 30 September 2021. The home loan portfolio of $A82.8 billion increased eight per cent on 30 September 2021, while funds on platform7 of $A120.9 billion increased four per cent. During 3Q21, the business banking loan portfolio increased four per cent to $A11.4 billion, while the car loans portfolio decreased 12 per cent to $A9.6 billion.
CGM had strong results across the commodities platform, particularly in global Gas & Power and Resources, driven by increased client hedging and trading opportunities from unusually challenging market conditions. CGM also saw solid contribution from client and trading activity across the Financial Markets businesses including fixed income, foreign exchange, credit and equities. CGM also saw continued growth in the Asset Finance balance sheet largely driven by Resources and Structured Lending, which contributed to strong annuity revenue flows across the platform.
Macquarie Capital completed 126 transactions globally in 3Q22, valued at $A105 billion8. Fee revenue was significantly up across Advisory, DCM and ECM, and investment-related income was also up substantially following exceptionally strong investment realisations. The Principal Finance portfolio of over $A15 billion including a $A13 billion credit portfolio at 31 December 2021, reflected more than $A4.5 billion committed in 3Q22 through focused investing in credit markets and the provision of bespoke financing solutions. Macquarie Capital is the No.1 Global Financial Adviser for infrastructure/project finance9 and No.1 in ANZ for M&A10. Macquarie Equities maintained its market leading ranking in Australia across research, sales, trading, ECM and corporate access11.
The Group highlighted business-specific factors impacting its short-term outlook:
Macquarie Asset Management - excluding the Waddell & Reed acquisition, which is not expected to provide a meaningful net profit contribution in FY22 due to integration and one-off costs:
Banking and Financial Services - ongoing momentum in loan, deposit and platform volumes:
Commodities and Global Markets
From a Corporate perspective, the FY22 compensation ratio and effective tax rate are expected to be broadly in line with historical levels.
The range of factors that may influence our short-term outlook include:
Ms Wikramanayake said, “We continue to maintain a cautious stance, with a conservative approach to capital, funding and liquidity that positions us well to respond to the current environment. More broadly, we remain well positioned over the medium term, based on our deep expertise in major markets, a diversified and adaptable mix of strong businesses, an ongoing program to identify cost saving initiatives and efficiency, a strong and conservative balance sheet and a proven risk management framework and culture.”
Macquarie also announced a one-time $A20 million additional allocation to the Macquarie Group Foundation to expand its Social Impact Investing pilot, to address employment and education social impact needs.
Macquarie’s Chief Financial Officer and Chair of the Macquarie Group Foundation, Alex Harvey, said: “This $A20 million allocation will enable the Foundation to build on the groundwork of a successful FY22 pilot, and more than ten years of wider sector support. The funds will be used to address important employment and education social impact needs across the spectrum of catalytic capital, as well as philanthropic grants to support sector building. Any financial returns will flow back to the Foundation for additional social impact.”