Sydney, 01 November 2019
Macquarie Group Limited (ASX: MQG; ADR: MQBKY) today announced a net profit after tax attributable to ordinary shareholders of $A1,457 million for the half year ended 30 September 2019 (1H20), up 11 per cent on the half year ended 30 September 2018 (1H19) and down 13 per cent on the half year ended 31 March 2019 (2H19).
Macquarie Group Managing Director and Chief Executive Officer, Shemara Wikramanayake, said: “Our first-half result highlights the benefits of the business and geographic diversity of the Group, with increased client activity across many of our business lines and favourable market conditions across the Commodities and Global Markets platform in particular.”
Annuity-style activities, which are undertaken by Macquarie Asset Management, Banking and Financial Services and certain businesses of Commodities and Global Markets (CGM), generated a combined net profit contribution of $A1,717 million, up 15 per cent on 1H19 and up 11 per cent on 2H19.
Markets-facing activities, which are undertaken by Macquarie Capital and most businesses of CGM delivered a combined net profit contribution of $A1,151 million, up four per cent on 1H19 and down 42 per cent on 2H19.
Net operating income of $A6,320 million in 1H20 was up eight per cent on 1H19 and down nine per cent on 2H19, while operating expenses of $A4,480 million were up nine per cent on 1H19 and down six per cent on 2H19.
The income tax expense for 1H20 was $A376 million, which was broadly in line with 1H19. The effective tax rate for 1H20 was 20.5 per cent, down from 22.2 per cent in 1H19 and 23.2 per cent in 2H19. The decrease was mainly driven by the geographic composition and nature of earnings.
At 30 September 2019 the Group employed 15,704 staff, which was in line with 31 March 2019. In addition, more than 120,000 people were employed at assets managed by Macquarie.
Macquarie’s assets under management (AUM) at 30 September 2019 were $A563.4 billion, up two per cent from $A551.3 billion at 31 March 2019, largely due to foreign exchange impacts, investments made by funds managed by Macquarie Infrastructure and Real Assets (MIRA) and market movements, partially offset by asset realisations made by MIRA-managed funds and net flows in Macquarie Investment Management.
Macquarie also announced today a 1H20 interim ordinary dividend of $A2.50 per share (40 per cent franked), up 16 per cent on the 1H19 interim ordinary dividend of $A2.15 per share (45 per cent franked) and down 31 per cent on the 2H19 final ordinary dividend of $A3.60 per share (45 per cent franked). This represents a payout ratio of 61 per cent. The record date for the final ordinary dividend is 12 November 2019 and the payment date is 18 December 2019.
Macquarie Group Chief Financial Officer Alex Harvey said: ‘Macquarie remains well funded with a solid and conservative balance sheet characterised by term liabilities exceeding term assets. We continue to pursue our strategy of diversifying funding sources by growing the deposit base and accessing a variety of funding markets.’
Total customer deposits4 increased to $A58.8 billion at 30 September 2019 from $A56.0 billion at 31 March 2019. A further $A10.8 billion of new term funding5 was raised covering a range of tenors, currencies and product types.
During 1H20, $A1.7 billion of equity capital was raised through a $A1.0 billion institutional placement and $A0.7 billion share purchase plan. The additional equity capital provides flexibility to invest in new opportunities while maintaining appropriate capital levels in light of ongoing regulatory change.
Macquarie’s financial position exceeds APRA’s Basel III regulatory requirements, with a Group capital surplus of $A6.7 billion at 30 September 2019. This surplus was up from $A6.1 billion at 31 March 2019, following 1H20 profit and movement in reserves and proceeds from the equity capital issuance but partially offset by strong business growth, payment of the FY19 final dividend and the FY19 Macquarie Group Employee Retained Equity Plan buying requirement.
The Bank Group APRA Basel III Common Equity Tier 1 capital ratio was 11.4 per cent (Harmonised: 14.0 per cent) at 30 September 2019, in line with 31 March 2019. The Bank Group’s APRA Leverage Ratio was 5.5 per cent (Harmonised: 6.1 per cent), the Liquidity Coverage Ratio was 172 per cent and the Net Stable Funding Ratio was 111 per cent at 30 September 2019. No discount will apply for the 1H20 Dividend Reinvestment Plan and the shares are to be acquired on market6.
APRA is currently undertaking regulatory reviews in a number of areas including, but not limited to: the capital treatment of investments in banking and insurance subsidiaries8; capital calculation and risk management requirements relating to Interest Rate Risk in the Banking Book9; loss-absorbing capacity10; and the finalisation of Basel III (‘unquestionably strong’)11. In addition, and as previously noted, APRA is in discussions with Macquarie on resolution planning and intra-group funding. Based on the current information available, it is Macquarie’s expectation that it will have sufficient capital to accommodate likely additional regulatory Tier 1 capital requirements as a result of the above changes, noting that some reviews are at an early stage and the final impact is therefore uncertain.
While the impact of future market conditions makes forecasting difficult, the Group currently expects the FY20 result to be slightly down on FY19.
The Group’s short-term outlook remains subject to a range of factors including:
Ms Wikramanayake said: “Macquarie remains well-positioned to deliver superior performance in the medium term due to: our deep expertise in major markets; strength in business and geographic diversity and ability to adapt the portfolio mix to changing market conditions; the ongoing program to identify cost saving initiatives and efficiency; a strong and conservative balance sheet; and a proven risk management framework and culture.’