Tag: Macquarie

In the latest trading update from Macquarie, despite ructions on the global markets, they said that trading conditions across the Group were satisfactory in the December 2015 quarter. Macquarie continues to expect the FY16 result to be up on FY15. We think they will deliver a profit north of $2.0bn full year.

The annuity-style businesses’ combined December 2015 quarter net profit contribution was up on December 2014 quarter (prior corresponding period) but down on September 2015 quarter (prior period) which benefited from strong performance fees in Macquarie Asset Management. On the other hand, the capital markets facing businesses’ combined December 2015 quarter net profit contribution were down on the prior corresponding period, which benefited from fee income from the Freeport LNG transaction in Commodities and Financial Markets and Macquarie Capital, and up on the prior period.

 

They reported APRA Basel III Group capital of $A17.3 billion and Group surplus of $A2.8 billion at 31 December 2015.

They said that the Banking and Financial Services’ (BFS) Australian mortgage portfolio was $A27.8 billion at 31 December 2015, up one per cent on 30 September 2015, representing approximately 1.9 per cent of the Australian market. Macquarie platform assets under administration increased to $A59.8 billion at 31 December 2015 up 28 per cent on 30 September 2015 , while BFS deposits increased to $A39.5 billion at 31 December 2015, up two per cent on 30 September 2015. During the quarter, BFS launched the first Macquarie savings and transaction accounts, and new Macquarie Black credit card with premium rewards.

The Group’s 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.

Mr Moore said: “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 our 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.”

Macquarie Group announced a net profit after tax attributable to ordinary shareholders of $A1,070 million for the half-year ended 30 September 2015 (1H16), up 58 percent on the half-year ended 30 September 2014 (1H15) and up 16 percent on the half-year ended 31 March 2015 (2H15). Net operating income of $A5.3 billion for 1H16 increased 24 percent on 1H15, while total operating expenses of $A3.7 billion for 1H16 increased 17 percent on 1H15. Return on equity was 15.8%.

Macquarie’s annuity-style businesses (Macquarie Asset Management (MAM), Corporate and Asset Finance (CAF) and Banking and Financial Services (BFS)) continued to perform well, with 1H16 combined net profit contribution up 38 percent on 1H15. Macquarie’s capital markets facing businesses (Macquarie Securities (MSG), Macquarie Capital and Commodities and Financial Markets (CFM)) continued to improve with combined net profit contribution up 66 percent on 1H15.

Net operating income of $A5.3 billion in 1H16 was up 24 percent on 1H15 and up seven percent on 2H15, while operating expenses of $A3.7 billion were up 17 percent on 1H15 and up three percent on 2H15.

International income accounted for 71 percent of the Group’s total income for 1H16. A 10 percent movement⁴ in the Australian dollar is estimated to have approximately seven percent impact on full year net profit. Given currency movements, Macquarie estimates approximately a quarter of the increase in 1H16 net profit on 1H15 is attributable to foreign exchange.

The effective tax rate of 33.1 percent was down from 38.9 percent in 1H15 and down on the full year ended 31 March 2015 (FY15).

Macquarie’s assets under management (AUM) at 30 September 2015 were $A504 billion, up four percent on 31 March 2015.

Key drivers of the change from the prior corresponding period were:

• A 38 percent increase in combined net interest and trading income to $A2.3 billion, up from $A1.6 billion in 1H15, with key drivers being improved trading opportunities in MSG driven by increased market volatility, increased client activity across most of the CFM platforms as a result of price volatility, the accretion of interest income on loans acquired at a discount and the favourable impact of the depreciation of the Australian dollar, partially offset by increased funding costs associated with growth of the operating lease portfolio in CAF and strong volume growth in Australian mortgages, business lending and deposits in BFS.
• A 29 percent increase in fee and commission income to $A2.8 billion, up from $A2.2 billion in 1H15, primarily driven by a significant increase in MAM performance fees; an increase in MAM base fees, largely due to higher AUM that benefited from favourable currency and market movements, fund raisings and investments in Macquarie Infrastructure and Real Assets (MIRA), together with net flows into higher fee margin products in Macquarie Investment Management (MIM); increased mergers and acquisitions, advisory and underwriting fees in Macquarie Capital; as well as increased brokerage and commissions income in MSG.
• A 31 percent decrease in other operating income and charges to $A0.3 billion, down from $A0.5 billion in 1H15, due to an increase in impairment charges and collective provisions particularly in CFM and Macquarie Capital, partially offset by an increase in net operating lease income in CAF.
• A 17 percent increase in total operating expenses, driven by higher employment expenses primarily due to higher staff compensation resulting from the improved performance of the Group, increased brokerage, commission and trading-related expenses driven by increased trading-related activity in MSG, higher non-salary technology expenses due to ongoing investment in technology projects to support business growth, and an increase in other operating expenses resulting from increased activity across Macquarie and the amortisation of capitalised technology costs. Overall operating expenses were also impacted by the depreciation of the Australian dollar on offshore expenses.

Staff numbers were 13,582 at 30 September 2015, down from 14,085 at 31 March 2015.

Macquarie also announced today an interim dividend of $A1.60 per share, 40 percent franked, up from the 1H15 dividend of $A1.30 per share and down from the 2H15 dividend of $A2.00 per share, both 40 percent franked. This represents a payout ratio of 51 percent. The record date is 11 November 2015 and the payment date for the interim dividend is 16 December 2015.

While the impact of future market conditions makes forecasting difficult, it is currently expected that the combined net profit contribution from operating groups for the year ending 31 March 2016 (FY16) will be up on FY15.

The income tax expense for 1H16 was $A530 million, up 23 percent from $A432 million in the prior corresponding period. The effective tax rate of 33.1 percent was down on FY15. 

Total customer deposits increased 7.8 percent from 31 March 2015 to $A42.8 billion at 30 September 2015. During 1H16, $A10.3 billion of term funding was raised covering a range of sources, tenors, currencies and product types as well as $A4.0 billion raised as an AWAS Aviation Capital Limited (AWAS) acquisition debt facility. 

During 1H16, Macquarie completed the on-market purchase of shares to satisfy the FY15 Macquarie Group Employee Retained Equity Plan (MEREP) requirements of $A383 million at a weighted average price of $A80.68.

In October 2015, the Group issued $A0.4 billion in equity via an Institutional Placement (Placement) to provide capital for the acquisition of the Esanda dealer finance portfolio from ANZ Banking Group. An associated Share Purchase Plan (SPP) will be offered to eligible shareholders in Australia and New Zealand from 2 November 2015, who can apply for shares with a dollar value of up to $A10,000. If eligible shareholders participated in the March 2015 SPP, the maximum value of shares allocated from both the March 2015 SPP and this offer is limited to $A15,000. The record date for participation in the SPP was 7 October 2015 (the day prior to the launch of the Placement).

SPP Shares will not be eligible for the 1H16 dividend, however the offer price will be adjusted to reflect this. SPP shares will be offered at the lower of:

–      $A78.40 representing the issue price paid under the Placement ($A80.00) less the 1H16 dividend ($A1.60); and

–      a 1.0 percent discount to the volume weighted average price of shares traded during the pricing period⁷.

Macquarie intends to redeem the Preferred Membership Interests $US400m hybrid in December 2015 and expects to replace these in due course.

Macquarie Group remains very well capitalised with APRA Basel III Group capital of $A16.9 billion at 30 September 2015, a $A3.1 billion surplus to Macquarie’s minimum regulatory capital requirement from 1 January 2016. The Bank Group APRA Basel III Common Equity Tier 1 capital ratio was 9.9 percent at 30 September 2015, which was up from 9.7 percent at 31 March 2015.

In August 2014, APRA issued its final rules for Conglomerates with implementation timing yet to be announced. Macquarie continues to work through the application of the rules with APRA and the current assessment remains that Macquarie has sufficient capital to meet the minimum APRA capital requirements for Conglomerates.

The government released its response to the Financial System Inquiry on 20 October 2015, agreeing with the majority of the recommendations and setting a timetable for their implementation. The government endorsed APRA to implement most of the resilience recommendations and so the final design of any policy changes has yet to be determined.

Based on finalised BCBS leverage ratio requirements⁹ released in January 2014, the Bank Group is well in excess of the currently proposed Basel III 3.0 percent minimum¹⁰, with a 6.0 percent leverage ratio as at 30 September 2015. APRA’s ‘super equivalence’ in relation to the definition of capital carries over to the leverage ratio. On an APRA basis, the Bank Group’s leverage ratio is 5.1 percent as at 30 September 2015.

Liquidity Coverage Ratio (LCR) requirements came into effect from 1 January 2015, with disclosure required from 1 July 2015. For the quarter ended September 2015 the Bank Group’s average LCR was 170 percent¹¹.

Operating Group performance:

• Macquarie Asset Management (MAM) net profit contribution of $A1,139 million for 1H16 increased 45 percent from $A785 million in 1H15. MAM’s base fee income of $A784 million for 1H16 increased 22 percent from $A641 million in 1H15, largely due to increased AUM that benefited from favourable currency and market movements, fund raisings and investments in MIRA, together with net flows into higher fee margin products in MIM. Performance fees of $A609 million for 1H16 increased significantly from $A373 million in 1H15, including performance fees from Macquarie Infrastructure Corporation (MIC) and Macquarie European Infrastructure Fund 1 (MEIF1), as well as performance fee income from co-investors in respect of a UK asset.
• Corporate and Asset Finance (CAF) net profit contribution of $A611 million for 1H16 increased 31 percent from $A468 million in 1H15. The improved result was largely driven by the favourable impact of the depreciation of the Australian dollar, the accretion of interest income on loans acquired at a discount in the Lending portfolio and increased net operating lease income mainly due to the contribution of aircraft acquired to date from AWAS. CAF’s asset and loan portfolio increased 13 percent from $A28.7 billion at 31 March 2015 to $A32.3 billion at 30 September 2015 mainly driven by the impact of the depreciation of the Australian dollar, the acquisition of aircraft during the period as well as and the acquisition of Advantage Funding in July 2015.
• Banking and Financial Services (BFS) net profit contribution of $A170 million for 1H16 increased 21 percent from $A141 million in 1H15. In 1H16, BFS benefited from strong volume growth in Australian mortgages, business lending and deposits partially offset by increased investment in technology projects to support growth in the business, including the development of a new Core Banking system. The Australian mortgage portfolio increased to $A27.6 billion, up 13 percent on 31 March 2015, representing approximately 1.8 percent of the Australian mortgage market. Macquarie platform assets under administration were broadly in line with 31 March 2015 at $A46.7 billion.
• Macquarie Securities Group (MSG) net profit contribution of $A240 million for 1H16 increased significantly from $A17 million in 1H15. MSG benefited from improved market and trading conditions in Australia and Asia due to increased market volatility, particularly in China, driving strong growth in trading-related income as well as increased brokerage and commissions income. Income growth was partly offset by increased operating expenses relative to 1H15 driven by the depreciation of the Australian dollar.
• Macquarie Capital net profit contribution of $A170 million for 1H16 increased 13 percent from $A150 million in 1H15 predominately due to increased mergers and acquisitions fee revenue, particularly in Australia and the US, partially offset by increased impairment charges relating to certain underperforming principal investments. During 1H16, Macquarie Capital advised on 208 transactions valued at $A116b including acting as joint lead manager and joint underwriter on National Australia Bank’s $A5.5b accelerated renounceable entitlement offer and financial adviser, debt and equity arranger to Freeport LNG on its $US4.6b project financing of Train 3 of its Liquefaction and Export Project.
• Commodities and Financial Markets (CFM) net profit contribution for 1H16 was $A282 million, an increase of 13 percent from $A250 million in 1H15. This result reflected improved returns across the commodities trading platform and the favourable impact of the depreciation in the Australian dollar while income from credit, interest rates and foreign exchange markets remained flat compared with 1H15. These were partially offset by higher provisions for impairments taken on certain underperforming commodity related loans.

As part of its regular investor communications program, Macquarie Group will be presenting at the CLSA Investors’ Forum in Hong Kong on 15 and 16 September 2015.

Contained within the presentation is an update to the short term outlook statement that Macquarie provided at the Group’s Annual General Meeting on 23 July 2015.

Macquarie continues to expect the FY16 result to be up on FY15:

• As a result of the continued weakening of the Australian dollar and improved trading conditions across most businesses including Macquarie Securities and Macquarie Asset Management (MAM), which benefited from strong performance fees, Macquarie expects the 1H16 result to be up approximately 40 per cent on 1H15, subject to the completion rate of transactions and the conduct of period end reviews

• The 2H16 result is expected to be broadly in line with 1H16, noting MAM is expecting lower performance fees in 2H16 than 1H16.

 

Macquarie Group reported both annuity-style businesses’ and capital markets facing businesses’ contributions  for the first quarter of the 2016 financial year were significantly up on the first quarter of the 2015 financial year and broadly in line with the prior quarter. Australian mortgage portfolio also increased 10 per cent to $A27.0 billion in the first quarter.

DFA estimates that profit growth in FY16 will be more than 10 per cent higher than the prior year, around A$1.8 billion.  This is helped by a weaker Australian dollar, as well as increased performance fees and asset disposals in Macquarie Asset Management. The full year number to 31 March 2015 was $A1.6 billion an increase of 27 per cent on the prior year.

Macquarie remains over capitalised with APRA Basel III Group capital of $A15.8 billion at 30 June 2015, a $A2.4 billion surplus in excess of Macquarie’s minimum regulatory capital requirement from 1 January 2016, which was down from $A2.7 billion at 31 March 2015. The APRA Basel III Common Equity Tier 1 (CET1) ratio for Macquarie Bank was 9.9 per cent at 30 June 2015, which was up from 9.7 per cent at 31 March 2015.

The APRA changes to the level of capital required to be held against residential mortgages will  impact Macquarie by $A150m (at 8.5% RWAs), equivalent to a 20 basis point reduction in the Bank Group’s CET1 ratio. This increased capital requirement will be accommodated from the existing capital surplus and retained earnings.

The acquisition of Macquarie shares required for the financial year ended 31 March 2015 (FY15) profit share and promotion awards under the Macquarie Group Employee Retained Equity Plan (MEREP) was completed in July 2015. A total of approximately $A383 million of Macquarie shares were purchased on-market at an average purchase price of $A80.68 per share.

First quarter business highlights

Macquarie Asset Management (MAM) had $A477.4 billion in assets under management at 30 June 2015, broadly in line with 31 March 2015, as positive net flows within Macquarie Investment Management (MIM) were offset by foreign exchange and market movements as well as net divestments within Macquarie Infrastructure and Real Assets (MIRA) managed funds. 1Q16 included performance fees of $A208 million, predominantly from Macquarie Infrastructure Company and Macquarie Atlas Roads. During the quarter, MIRA completed six acquisitions and three follow-on investments in five countries, totalling $A1.4 billion of equity under management. MIM was awarded over $A2 billion in new institutional mandates across ten strategies in six countries and Macquarie Specialised Investment Solutions raised over $A900 million for Australian principal protected investments and specialist funds.

Corporate and Asset Finance’s (CAF) asset and loan portfolio increased to $A29.2 billion at 30 June 2015 from $A28.7 billion at 31 March 2015. During the quarter there were portfolio additions of $A1.2 billion in corporate and real estate lending. Strong securitisation activity continued with a further $A0.9 billion of motor vehicle leases and loans securitised during the quarter. In July, CAF settled on 37 of the 90 aircraft committed from AWAS Aviation Capital in FY15.

Banking and Financial Services’ (BFS) retail deposits increased to $A38.0 billion at 30 June 2015. Business lending increased 10 per cent on FY15 to $A5.7 billion and the Australian mortgage portfolio also increased 10 per cent to $A27.0 billion. BFS’ Wrap platform funds under administration remained broadly in line with 31 March 2015 at $A47.4 billion.

Macquarie Securities Group (MSG) benefited from increased volumes and volatility in the market, particularly in Asia where the liberalisation of China’s capital markets and credit easing resulted in significant increases in client activity in the region. Australian ECM activity remained strong and MSG was ranked No.1 for completed ECM deals  in Australia and New Zealand (ANZ) during the quarter. The derivatives and trading business also benefited significantly from favourable market conditions.

Macquarie Capital benefited from the continued strength of global mergers and acquisitions (M&A) and ECM activity during the quarter. 119 deals totalling $A82 billion were completed in 1Q16, up significantly (by value) on both 1Q15 and 4Q15, mainly due to the timing of large advisory transactions. Macquarie Capital maintained its ranking of No.1 for both announced and completed M&A deals⁶  and No.1 for completed ECM deals  in ANZ, and was awarded Best Domestic Equity House Australia 2015 .

Commodities and Financial Markets (CFM) experienced continued volatility in energy markets over the quarter, which led to increased customer business, primarily in Global Oil and North American Gas. Metals activity remained steady while agriculture experienced increased volatility and client volumes. Client volumes were stable in foreign exchange and interest rate markets, while US credit markets remained mixed due to global geopolitical uncertainty. Macquarie Energy maintained its Platts ranking of No.3 US physical gas marketer in North America.

Macquarie Group today announced a net profit after tax attributable to ordinary shareholders of $A1,604 million for the full year ended 31 March 2015 (FY15), up 27 per cent on the full year ended 31 March 2014 (FY14) and above expectations. Profit for the second half of the year (2H15) was $A926 million, up 37 per cent on the first half (1H15). The six months to 31 March 2015 saw Macquarie’s annuity-style businesses (Macquarie Asset Management (MAM), Corporate and Asset Finance (CAF) and Banking and Financial Services (BFS)) continue to perform well with combined net profit contribution1 up four per cent on 1H15 and up 29 per cent on 2H14. Macquarie’s capital markets facing businesses (Macquarie Securities Group (MSG), Macquarie Capital and Commodities and Financial Markets (CFM)) also delivered an improved result with combined net profit contribution1 up significantly on 1H15, and up 24 per cent on 2H14. Macquarie’s annuity-style businesses’ FY15 combined net profit contribution1 increased by $A710 million, or 33 per cent, on FY14. Macquarie’s capital markets facing businesses’ FY15 combined net profit contribution1 increased by $A216 million, or 19 per cent, on FY14.

Net operating income of $A9.3 billion for FY15 was up 14 per cent, while total operating expenses of $A6.8 billion were up 12 per cent on the prior year. Key drivers of the change from the prior year were:

• A 17 per cent increase in combined net interest and trading income to $A3.8 billion, up from $A3.3 billion in FY14, resulting from loan portfolio growth for both CAF and BFS and improved trading results in CFM and MSG
• A 24 per cent increase in fee and commission income to $A4.8 billion, up from $A3.9 billion in FY14, primarily driven by higher base and performance fees in MAM, improved levels of advisory fee income in Macquarie Capital and CFM and higher debt capital markets activity
• An 18 per cent decrease in other operating income and charges to $A0.7 billion, from $A0.9 billion in FY14. Increased gains on business and asset sales, predominately in CAF, were offset by higher impairment charges and collective provisions as well as non-recurrence of FY14 items such as the dividend income and gain on disposal of SYD and OzForex
• Total operating expenses increased 12 per cent, driven by: an 11 per cent increase in employment expenses resulting primarily from improved Group performance; increased technology costs due to higher development activity to support business growth as well as increased regulatory compliance; increased other operating expenses largely driven by an overall increase in the Group’s operating activity; and the impact of the depreciation of the Australian dollar on offshore expenses.

Staff numbers were 14,085 at 31 March 2015, up from 13,913 at 31 March 2014.

The income tax expense for FY15 was $A899 million, up nine per cent from $A827 million in the prior year. The effective tax rate of 35.9 per cent was down from 39.5 per cent in FY14 driven by the nature and geographic mix of income and tax uncertainties.

Retail deposits increased by 12 per cent to $A37.3 billion at 31 March 2015, with total deposits increasing during the year from $A36.9 billion to $A39.7 billion at 31 March 2015. During FY15, $A21.5 billion of new term funding was raised covering a range of sources, tenors, currencies and product types.

While Macquarie continued to build on the strength of its Australian franchise, its international income accounted for 70 per cent of the Group’s total income for FY15. This reflects the growth of international operations, particularly in the Americas which was the largest contributing region with 36 per cent of total income, as well as the favourable impact of foreign exchange movements.

The effective tax rate for FY15 was 35.9 per cent, down from 39.5 per cent in FY14.

Macquarie’s assets under management (AUM) at 31 March 2015 were $A486.3 billion, up 14 per cent from $A426.9 billion at 31 March 2014 largely due to additional investments and favourable foreign exchange and market movements.

A final ordinary dividend of $A2.00 per share (40 per cent franked), up from the 1H15 ordinary dividend of $A1.30 per share (40 per cent franked) will be paid. The total ordinary dividend payment for the year was $A3.30 per share, up from $A2.60 in the prior year. This represents an annual ordinary dividend payout ratio of 68 per cent. The record date for the final ordinary dividend is 20 May 2015 and the payment date is 2 July 2015.

Macquarie Group remains very well capitalised with APRA Basel III Group capital of $A16.1 billion at 31 March 2015, a $A2.7 billion surplus to Macquarie’s minimum regulatory capital requirement from 1 January 20167. The Bank Group APRA Basel III Common Equity Tier 1 capital ratio was 9.7 per cent at 31 March 2015, slightly up on 31 March 2014.

Macquarie intends to purchase approximately $A390 million of shares on-market to satisfy the requirements of the Macquarie Group Employee Retained Equity Plan (MEREP) for FY15. The buying period for the MEREP will commence on 18 May 2015 and is expected to be completed by 10 July 20159. No discount will apply for the 2H15 Dividend Reinvestment Plan (DRP) and the shares required under the DRP are to be acquired on market.

Outlook

While the impact of future market conditions makes forecasting difficult, it is currently expected that the combined net profit contribution1 from operating groups for the year ending 31 March 2016 (FY16) will be broadly in line with FY15. The FY16 tax rate is currently expected to be broadly in line with 2H15, and down on FY15. Accordingly, the FY16 result for the Group is currently expected to be slightly up on FY15.  The Group’s 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.

Regulatory update

In August 2014, APRA issued its final rules for Conglomerates with the implementation timing dependent on the outcomes of the Financial System Inquiry. Macquarie continues to work through the application of these rules with APRA and the Group’s current assessment remains that Macquarie has sufficient capital to meet the minimum APRA capital requirements for Conglomerates. Based on finalised Bank for International Settlements (BIS) leverage ratio requirements released in January 2014, the Bank Group is well in excess of the currently proposed Basel III three per cent minimum, with an estimated 6.0 per cent leverage ratio as at 31 March 2015. The leverage ratio applies to the Bank Group only. APRA published draft standards relating to the leverage ratio in September 2014 and is currently undertaking industry consultation regarding its final form.

Liquidity Coverage Ratio (LCR) requirements, which also only apply to the Bank Group, came into effect on 1 January 2015. As at 31 March 2015, the Bank Group’s LCR exceeded 120 per cent. Macquarie has been compliant with the LCR at all times since the ratio became a minimum requirement, with the average LCR for the first quarter of 2015 also exceeding 120 per cent. APRA has recently indicated its intention to deal with the level of capital held against mortgages, perhaps narrowing the mortgage risk weight differential between internal ratings-based (IRB) and standardised approach banks. While it remains unclear if, and to what extent, the gap will be narrowed, if the current APRA standardised approach were to be used instead of Macquarie’s IRB mortgage risk weights, the expected impact on the Bank Group’s Common Equity Tier 1 capital would be less than $A250 million.

Operating group performance

Macquarie Asset Management delivered a net profit contribution1 of $A1,450 million, up 38 per cent on the prior year. The result was driven by strong performance fee income and growth in annuity base fee income from higher assets and equity under management. AUM increased 14 per cent on the prior year to $A484.0 billion. Macquarie Infrastructure and Real Assets (MIRA) raised $A8.3 billion in new equity commitments during the year, invested equity of $A6.2 billion in portfolio assets across the globe and divested assets of over $A2.5 billion. Macquarie Investment Management (MIM) continued its strong investment performance, launched several new products across the fixed income, equities and alternatives asset classes, reached capacity in a number of strategies and continued to expand its global distribution network. Macquarie Specialised Investment Solutions continued to grow the Macquarie Infrastructure Debt Investment Solutions (MIDIS) business reaching second close on the UK Inflation-linked Infrastructure Debt Fund to bring total third party investor commitments to the MIDIS platform to over $A3.3 billion.

Corporate and Asset Finance delivered a net profit contribution1 of $A1,112 million, up 35 per cent on the prior year, including gains on several asset sales. CAF’s asset and loan portfolio increased 13 per cent during the year to $A28.7 billion. The corporate and real estate lending portfolio increased by 24 per cent to $A11.2 billion. There were $A4.7 billion of portfolio additions, comprising $A3.1 billion in new primary financings and $A1.6 billion of loans acquired in the secondary market. CAF’s asset finance portfolio of $A17.5 billion was up six per cent on the prior year due to the impact of the depreciation of the Australian dollar. The aircraft leasing business signed an agreement to acquire an operating lease portfolio of 90 aircraft valued at approximately $US4.0 billion, with acquisition and delivery to be completed during FY16. Throughout the year CAF also saw the continued expansion in the motor vehicle and equipment finance channels, as well as growth in the energy asset portfolio of smart meters in the UK and solar energy assets in Australia. CAF continued its securitisation activities, with $A4.0 billion of motor vehicle and equipment leases and loans securitised during FY15.

Banking and Financial Services delivered a net profit contribution1 of $A285 million, up 10 per cent on the prior year. BFS’ Australian mortgage portfolio grew by 44 per cent to $A24.5 billion, including $A2.5 billion in residential mortgage portfolios acquired during the year. This portfolio represents 1.7 per cent of the Australian mortgage market. Macquarie platform assets under administration increased by 19 per cent during the year to $A48.0 billion, while Macquarie Life inforce risk premiums increased by 17 per cent to $A223 million. Average business banking deposits increased 19 per cent over the year, with the business banking loan portfolio at $A5.2 billion as at 31 March 2015, up 27 per cent from $A4.1 billion in the prior year. Total retail deposits were up 12 per cent to $A37.3 billion. During the year BFS continued to invest in its technology to improve client experience, support growth and simplify, streamline and centralise its product and transactional functions.

Macquarie Securities Group delivered a net profit contribution1 of $A64 million, down from $A107 million in the prior year. Brokerage income remained relatively flat whilst equity capital markets activity increased on the prior year largely driven by initial public offering (IPO) activity in Australia. Certain markets experienced favourable conditions, which benefited the derivatives and trading divisions, however operating expenses (excluding brokerage, commission and trading-related expenses) were up 11 per cent on the prior year, resulting largely from investment in platforms and processes driven by regulatory compliance requirements, as well as restructuring costs from the exit of Structured Products. Macquarie was ranked No.1 in Australia for IPOs and No.2 for Australian equity and equity related deals in calendar year 2014. MSG continued to build on its expertise as one of the largest derivative warrant issuers in the Asia-Pacific region, holding No.1 market share for listed warrants in Singapore and Malaysia, No.3 in Thailand and No.7 in Hong Kong.

Macquarie Capital delivered a net profit contribution1 of $A430 million, up 54 per cent on the prior year. The business advised on 470 transactions worth $A141 billion and was ranked No.1 for announced and completed merger and acquisitions (M&A) deals in Australia in calendar year 2014. During the year, Macquarie Capital advised Freeport LNG on its landmark $US11.0 billion equity and debt raising to project finance its LNG export facility in Texas; was Joint Lead Manager on the $A5.7 billion IPO of Medibank Private, the largest Australian IPO in calendar year 2014 and the second largest Australian IPO ever; advised Emperador on its acquisition of Whyte & Mackay from United Spirits for £430 million; and was sole Sponsor and exclusive Financial Adviser to IHS Lothian for the project finance facilities of £185 million to the Royal Hospital for Sick Children public private partnership project in Edinburgh.

Commodities and Financial Markets delivered a net profit contribution1 of $A835 million, up 15 per cent on the prior year. The improved result reflected a general improvement in market conditions compared to the prior year. The Energy Markets business was a significant contributor to CFM’s overall result with revenues generated across the global energy platform, particularly in Global Oil and North American Gas. The Metals, Mining and Agriculture business had an overall improved result on the prior year, primarily driven by continued growth in the base metals platform across financing, physical execution and hedging activities, however further provisions for impairment were taken on underperforming resources investments and loans. Volatility and volumes improved in foreign exchange, interest rates and futures markets in the second half. US credit markets were mixed, however debt capital markets volumes and fees increased as M&A activity increased. The securitisation and origination businesses experienced continued growth and increased transaction flows, particularly in the UK and Europe.

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.