Macquarie Group Operational Briefing

Macquarie Group Limited (Macquarie) 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). It was a solid story, and the changes in business mix are likely to support momentum together with positive movements in exchange rates.

Trading conditions across the Group have continued to improve during the Dec 14 quarter and there has been a continued weakening of the Australian dollar
Annuity-style businesses’ combined Dec 14 quarter net profit contribution down on both a strong Dec 13 quarter (prior corresponding period) and Sep 14 quarter (prior period) which benefited from significant performance fees in Macquarie Asset Management (formerly Macquarie Funds Group) and the sale of OzForex
Capital markets facing businesses experienced improved trading conditions with combined Dec 14 quarter net profit contribution¹ up significantly on both the prior corresponding period and the prior period
APRA Basel III Group capital of $A14.3 billion, $A1.4 billion surplus to minimum regulatory capital requirements from 1 January 2016³, $A2.6 billion surplus to existing requirements
Macquarie Funds Group has changed its name to Macquarie Asset Management, and Fixed Income, Currencies and Commodities has changed its name to Commodities and Financial Markets to better align the group names to their business activities

Looking at the segmentals:

Macquarie Asset Management (MAM), Australia’s largest global asset manager, saw assets under management increase to $A453.3 billion at 31 December 2014 from $A423.3 billion at 30 September 2014. Since 1H15, Macquarie Infrastructure and Real Assets raised $A2.2 billion in new equity, largely in Pan-Asia infrastructure. Macquarie Investment Management was awarded $A2.1 billion in new, funded institutional mandates across 14 strategies from clients in six countries. Macquarie Specialised Investment Solutions reached first close on the UK Inflation-linked Infrastructure Debt Fund.
Corporate and Asset Finance (CAF) experienced continued growth in the lending and asset portfolios, increasing to $A29.0 billion at 31 December 2014 from $A27.5 billion at 30 September 2014. CAF continued to grow its corporate and real estate lending portfolios across all geographies, and the Energy Leasing business continued its key funding role in the rollout of smart meters throughout the UK.
Banking and Financial Services (BFS) increased its Australian mortgage portfolio to $A22.3 billion at 31 December 2014 from $A19.8 billion at 30 September 2014, which represents 1.6 per cent of the Australian mortgage market. Macquarie platform assets under administration increased by four per cent during the December 2014 quarter to $A43.2 billion while retail deposits increased by one per cent during the same period to $A35.7 billion.
Macquarie Securities Group (MSG) held the No.1 market share position for Australia/New Zealand Initial Public Offerings (IPOs) by number and value of deals⁵. In October 2014, MSG launched its Malaysia Structured Warrants product gaining No.1 market share⁶, establishing Macquarie as a leading issuer in Asia by coverage.
Macquarie Capital completed a number of transactions in the December 2014 quarter including: Joint Lead Manager on the $A5.7 billion IPO of Medibank Private, the largest Australian IPO in 2014 and the second largest Australian IPO ever; Adviser to Freeport LNG on its landmark $US11 billion equity and debt raising to project finance its LNG export facility in Texas; and Adviser to State Grid Corporation of China on the €2.1 billion acquisition of a 35 per cent interest in CDP RETI in Italy.
Commodities and Financial Markets (CFM) experienced increased volatility in oil and gas prices which generated increased customer activity across the energy platform. The business also experienced stronger client flows in foreign exchange due to increased market volatility. CFM is ranked the No.3 US physical gas marketer in North America

Looking further at the Australian mortgage business, we see significant growth in the book, a fall in the mix of high LVR loans, and a slightly higher concentration in NSW and Investment loans than system. The Australian mortgage portfolio includes $1.5 billion portfolio of non-branded mortgages they purchased from ING in September.