Sydney, 28 July 2011
Macquarie Group (ASX: MQG; ADR: MQBKY) Managing Director and Chief Executive Officer Nicholas Moore said today that the contribution made by operating groups during the first quarter 2012 financial year (1Q12) was ahead of a subdued first quarter of the 2011 financial year (1Q11), but down on the prior quarter (4Q11) due to weaker market conditions.
Speaking ahead of Macquarie’s 2011 annual general meeting, Mr Moore said: “Compared with the prior corresponding period (1Q11), an increased contribution from our annuity-style businesses in 1Q12 more than offset the lower contribution from those impacted by subdued market conditions.”
The 1Q12 contribution from Macquarie Funds Group (MFG), Corporate and Asset Finance (CAF) and Macquarie Capital was up on 1Q11. MFG benefited from continued inflows due to strong investment performance. CAF’s asset and lease portfolios, up 11 per cent on the prior corresponding period (1Q11), performed strongly during the quarter. Macquarie Capital completed 114 deals in 1Q12 valued at $A24 billion, compared with 118 deals in 1Q11 valued at $A16 billion.
The contribution from Banking and Financial Services (BFS) in 1Q12 was in line with 1Q11. Macquarie remained the number one-ranked retail full-service broker in Australia for the quarter.
The contribution from Macquarie Securities Group (MSG) and Fixed Income, Currencies and Commodities (FICC) in 1Q12 was down on 1Q11. MSG was impacted by quieter equity markets and challenging equity capital markets conditions. FICC experienced reduced volumes and lower volatility in most markets.
The Group had $A308 billion of assets under management at June 2011, which was broadly in line with March 2011. Net inflows and equity movements were offset by decreases due to foreign exchange movements.
While there were no significant one-off items during the quarter, high levels of cash continued to impact the Group’s current earnings.
Group capital was $A11.6 billion at 30 June 2011, a $A2.9 billion buffer in excess of Macquarie’s minimum regulatory capital requirements.
The Tier-1 capital ratio for the Banking Group was 11.5 per cent, up from 10.7 per cent at 31 March 2011. Total capital was 15 per cent, up from 12.4 per cent at 31 March 2011. Macquarie’s current assessment is that it has sufficient capital to meet the Basel III capital and leverage ratio requirements.
In commenting on the Group’s start to the 2012 financial year, Mr Moore noted the following highlights:
Mr Moore said: “Consistent with our statement at the FY11 result announcement on 29 April 2011, we continue to expect an improved result for FY12 on FY11, if market conditions for FY12 are not materially worse than FY11.
“Given subdued conditions are likely to continue for the first half of the 2012 financial year (1H12) we currently expect the contribution from operating groups in 1H12 to be broadly in line with the prior corresponding period (1H11).
Due to a higher tax rate in 1H12 and the absence of the benefit of the MAp AVS reclassification included within the prior corresponding period (1H11), the 1H12 result is likely to be lower than the first half of the 2011 financial year. The second half of the 2012 financial year is likely to be impacted by the cash amount to be made available to investors noted within MAp’s recent announcement.
Mr Moore noted: “The FY12 result also remains subject to a range of other challenges including movements in foreign exchange rates, increased competition across all markets, the cost of our continued conservative approach to funding and capital, and regulation, including the potential for regulatory changes.
“Macquarie is increasingly well-positioned to deliver superior performance in the medium-term. We continue to adapt our portfolio mix to changing market conditions, we continue to have a strong and conservative balance sheet and we have a proven risk management framework and culture.”
In providing an overview of FY11, Macquarie Group Chairman, Kevin McCann, said that Macquarie’s performance for the year ended 31 March 2011 reflected improved second-half conditions, with the Group reporting a full-year profit of $A956 million.
Mr McCann paid tribute to Macquarie’s former Chairman, David Clarke AO, who passed away earlier this year. He recognised the pivotal role that Mr Clarke played in setting the policies and practices that have driven Macquarie’s growth over the past four decades, as well as his enduring philanthropic legacy.
Mr McCann recognised the achievements of the Macquarie Group Foundation, which Mr Clarke formed more than 30 years ago.
“Since inception, the Macquarie Group Foundation, together with Macquarie staff, has contributed more than $A145 million to not-for-profit organisations globally as well as countless hours of time in volunteering and pro bono support,” Mr McCann said.