Macquarie : 2024 full-year result management discussion and analysis

Notice to readers

The purpose of this report is to provide information supplementary to the Macquarie Group Limited Financial Report (the Financial Report) for the year ended 31 March 2024, including further detail in relation to key elements of Macquarie Group Limited and its subsidiaries' (Macquarie, the Consolidated Entity) financial performance and financial position. The report also outlines the funding and capital profile of the Consolidated Entity.

Certain financial information in this report is prepared on a different basis to that contained in the Financial Report, which is prepared in accordance with Australian Accounting Standards. Where financial information presented within this report does not comply with Australian Accounting Standards, a reconciliation to the statutory information is provided.

Date of this report

This report has been prepared for the year ended 31 March 2024 and is current as at 3 May 2024.

Explanatory notes

Comparative information and conventions

Where necessary, comparative figures have been restated to conform to changes in current year financial presentation and group structures.

References to the prior year are to the 12 months ended 31 March 2023. References to the first half are to the six months ended 30 September 2023. References to the second half are to the six months ended 31 March 2024.

In the financial tables throughout this document '*' indicates that the absolute percentage change in the balance was greater than 300% or indicates the result was a gain in one period but a loss in another, or vice versa.

Independent Auditor's Report

This document should be read in conjunction with the Financial Report for the year ended 31 March 2024, which was subject to independent audit by PricewaterhouseCoopers.

PricewaterhouseCoopers' independent auditor's report to the members of Macquarie Group Limited dated 3 May 2024 was unqualified.

Any additional financial information in this document which is not included in the Financial Report was not subject to independent audit by PricewaterhouseCoopers.

Disclaimer

The material in this document has been prepared by Macquarie Group Limited ABN 94 122 169 279 ("MGL") and is general background information about Macquarie's ("MGL and its subsidiaries")' activities current as at the date of this document. This information is given in summary form and does not purport to be complete. The material in this document may include information derived from publicly available sources that have not been independently verified. Information in this document should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities or other financial products or instruments and does not take into account your particular investment objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information having regard to these matters, any relevant offer document and in particular, you should seek independent financial advice. No representation or warranty is made as to the accuracy, completeness or reliability of the information. All securities and financial product or instrument transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk.

This document may contain forward looking statements - that is, statements related to future, not past, events or other matters - including, without limitation, statements regarding our intent, belief or current expectations with respect to Macquarie's businesses and operations, market conditions, results of operation and financial condition, capital adequacy, provisions for impairments and risk management practices. Readers are cautioned not to place undue reliance on these forward looking statements. Macquarie does not undertake any obligation to publicly release the result of any revisions to these forward looking statements or to otherwise update any forward looking statements, whether as a result of new information, future events or otherwise, after the date of this document. Actual results may vary in a materially positive or negative manner. Forward looking statements and hypothetical examples are subject to uncertainty and contingencies outside Macquarie's control. Past performance is not a reliable indication of future performance.

Other than Macquarie Bank Limited ABN 46 008 583 542 ("MBL"), any Macquarie group entity noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act

1959 (Cth). That entity's obligations do not represent deposits or other liabilities of MBL and MBL does not guarantee or otherwise provide assurance in respect of the obligations of that entity. Any investments are subject to investment risk including possible delays in repayment and loss of income and principal invested.

Contents

01 02

Result Overview		Financial Performance
		Analysis
1.1 Executive Summary	3	2.1 Net Interest and Trading Income
		2.2 Fee and Commission Income

2.3 Share of Net Profits/(Losses) from Associates and Joint Ventures

2.4 Credit and Other Impairment Reversals/(Charges)

2.5 Net Other Operating Income

2.6 Operating Expenses

2.7 Headcount

2.8 Income Tax Expense

11

14

16

17

19

20

21

22

06		07
Capital		Funds Management
6.1 Overview	71	7.1 Assets Under Management	81
6.2 Bank Group Capital	73	7.2 Equity Under Management	82
6.3 Non-Bank Group Capital	76

03 04 05

Segment Analysis		Balance Sheet		Funding and
					Liquidity
3.1	Basis of Preparation	25	4.1 Statement of Financial Position	43	5.1	Liquidity Risk Governance and
3.2 MAM	29	4.2 Loan Assets	45	Management Framework
3.3 BFS	31	4.3 Equity Investments	47	5.2 Management of Liquidity Risk
3.4 CGM	33			5.3 Funded Balance Sheet
3.5	Macquarie Capital	36			5.4	Funding Profile for Macquarie
3.6	Corporate	38			5.5	Funding Profile for the Bank Group
3.7	International Income	40			5.6	Funding Profile for the Non-Bank
					Group

5.7 Explanatory Notes Concerning

Funding Sources and Funded Assets

51

53

55

57

61

65

67

08		09
Glossary		Ten Year History
8.1 Glossary	85	9.1 Ten Year History	93

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Results	Financial	Segment	Balance	Funding and	Funds	Ten Year
Performance
Overview	Analysis	Analysis	Sheet	Liquidity	Capital Management Glossary	History

Macquarie Group Limited 2024 Management Discussion and Analysis	2

1.1 Executive Summary

Macquarie (MGL and its subsidiaries, the Consolidated Entity) is a global financial services group with offices in 34 markets.

Macquarie Group Limited (MGL, the Company) is listed in Australia and is regulated by the Australian Prudential Regulation Authority (APRA), the Australian banking regulator, as a Non-Operating Holding Company (NOHC) of Macquarie Bank Limited (MBL), an authorised deposit-taking institution (ADI). Macquarie's activities are also subject to supervision by various other regulatory agencies around the world.

Founded in 1969, Macquarie now employs over 20,6001 people globally, has total assets of $A403.4 billion and total equity of $A34.0 billion as at 31 March 2024.

Macquarie's breadth of expertise covers asset management, retail and business banking, wealth management, leasing and asset financing, market access, commodity trading, renewables development, specialist advice, access to capital and principal investment. The diversity of our operations, combined with a strong capital position and robust risk management framework, has contributed to Macquarie's 55-year record of unbroken profitability.

Macquarie works with government, institutional, corporate and retail clients and counterparties around the world, providing a diversified range of products and services. We have established leading market positions as a global specialist in a wide range of sectors, including renewables, infrastructure, resources and commodities and energy.

Alignment of interests is a longstanding feature of Macquarie's client-focused business, demonstrated by our willingness to both invest alongside clients and closely align the interests of our shareholders and staff.

• This figure includes staff employed in certain operationally segregated subsidiaries (OSS).

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Results	Financial	Segment	Balance	Funding and	Funds	Ten Year
Performance
Overview	Analysis	Analysis	Sheet	Liquidity	Capital Management Glossary	History

FY2024 net profit1

$A3,522m

• 32% on prior year

FY2024 net operating income

$A16,887m

• 12% on prior year

FY2024 return on equity

10.8%

• from 16.9% in the prior year

FY2024 operating expenses

$A12,061m

• 1% on prior year

FY2024 net profit contribution2 by activity

Annuity-style activities	Markets-facing activities
$A3,014m	$A3,699m
â 27% on prior year	â 40% on prior year

• Net profit is profit after tax attributable to ordinary equity holders of Macquarie Group Limited.

• Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax.

Macquarie Group Limited 2024 Management Discussion and Analysis	4

1.1 Executive Summary

Continued

FY2024 net profit contribution by Operating Group

Summary of the Operating Groups' performance for the year ended 31 March 2024.

Annuity-style businesses

Markets-facing businesses

Non-Banking Group

Macquarie Asset Management (MAM)

$A1,208m

• 48% on prior year due to

• decreased net income on equity, debt and other investments driven by lower asset realisations in green investments
• increased net expenditure on investments in green energy portfolio companies operating on a standalone basis
• increased net interest and trading expense primarily driven by higher funding costs due to an increase in central bank interest rates and investments.

Partially offset by:

• reversal of an impairment previously recognised on a green equity investment.

Macquarie Capital

$A1,051m

• 31% on prior year due to

• higher net interest and trading income primarily from the private credit portfolio, benefitting from $A3.6 billion growth in average drawn loan assets with margins in line with the prior year and the non-recurrence of mark-to- market losses on certain debt underwriting positions
• lower credit provisions due to an improvement in the macroeconomic outlook and lower deployment of the private credit portfolio
• reversal of impairments on a small number of previously underperforming investments.

Partially offset by:

• lower net gains on investments including the non-recurrence of material asset realisations
• lower fee and commission income driven by lower mergers and acquisitions fee income due to weaker market activity
• higher funding costs reflecting higher central bank interest rates and investment activity
• higher operating expenses driven by higher expenditure on technology platforms, increased compliance and regulatory spend and higher employment expenses.

Banking Group

Banking and Financial Services (BFS)

$A1,241m

• 3% on prior year due to

• higher net interest and trading income driven by growth in the loan portfolio and BFS deposits, and the full year benefit of the rising interest rate environment, partially offset by margin compression due to changes in portfolio mix, lending competition and higher funding costs
• higher fee and commission income driven by growth in average funds on platform, as well as higher lending and transaction volumes
• credit impairment reversals largely driven by an improvement in the macroeconomic outlook, partially offset by changes in composition of portfolio growth.

Partially offset by:

• higher operating expenses driven by higher employment expenses and increased technology investment to support portfolio growth, compliance and regulatory requirements.

Commodities and Global Markets (CGM)1

$A3,213m

• 47% on prior year due to

• substantially lower inventory management and trading income driven by a reduction in trading activity, primarily in North American Gas and Power, partially offset by timing of income recognition on Gas and Power transport and storage contracts
• decreased risk management income primarily in EMEA Gas and Power, and Resources due to decreased client hedging as volatility and price movements stabilised across commodity markets following record highs in the prior year. The decrease was partially offset by an increased contribution from Agricultural markets
• higher operating expenses driven by higher expenditure on technology platform and infrastructure, compliance and regulatory spend and higher employment expenses.

Partially offset by:

• increased foreign exchange, interest rate and credit products income driven by increased client hedging in foreign exchange and interest rate products and an increased contribution from the Futures business
• increased operating lease income driven by increased volumes in technology and energy sectors.

Corporate

Net expenses of $A3,191m

â38% on prior year due to

• reduced operating expenses driven by lower performance-related profit share expense as a result of the performance of the Consolidated Entity and lower expenses on certain legacy and other transaction-related charges
• increased net interest and trading income, driven by increased earnings on capital reflecting higher central bank interest rates and higher average volumes, the impact of the Group's previously elevated centrally held liquidity and funding surpluses being deployed by the Operating Groups, and improved returns on Group Treasury's liquid asset portfolio
• reduced income tax expense as a result of the performance of the Consolidated Entity, partially offset by a higher effective tax rate mainly driven by the geographic composition and nature of earnings.

1 Certain assets of the Financial Markets business, certain activities of the Commodity Markets and Finance business, and some other less financially significant activities are undertaken from within the Non-Banking Group.

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