Macquarie : 2021 full year result management discussion and analysis

Macquarie Group

Management Discussion

and Analysis

Year ended 31 March 2021

Macquarie Group Limited ACN 122 169 279

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 2021, 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 2021 and is current as at 7 May 2021.

Cover image

1. Macquarie-managedfund has been invested in Aligned Energy since 2018, supporting the developer, owner, and operator of data centres expand its presence across the United States.

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 2020.

References to the first half are to the six months ended 30 September 2020.

References to the second half are to the six months ended 31 March 2021.

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 2021, which was subject to independent audit by PricewaterhouseCoopers.

PricewaterhouseCoopers' independent auditor's report to the members of Macquarie Group Limited dated

7 May 2021 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, the Company) and is general background information about Macquarie Group Limited and its subsidiaries' (Macquarie) 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.

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Contents

01		02
Result Overview		Financial
1.1 Executive Summary	10	Performance
Analysis
		2.1	Net Interest and Trading
			Income	18
		2.2	Fee and Commission Income	21
		2.3	Net Operating Lease Income	23
		2.4	Share of Net Profits/
			(Losses) from Associates and
			Joint Ventures	23
		2.5	Credit and Other Impairment
			Charges	24
		2.6	Other Operating Income and
			Charges	26
		2.7	Operating Expenses	27
		2.8	Headcount	28
		2.9	Income Tax Expense	29

06 07

Capital		Funds Management
6.1	Overview	76	7.1	Assets Under Management	86
6.2	Bank Group Capital	78	7.2	Equity Under Management	87
6.3	Non-Bank Group Capital	81

Macquarie Group Limited and its subsidiaries 2021 Annual Report

03		04		05
Segment Analysis		Balance Sheet		Funding and Liquidity
3.1	Basis of Preparation	32	4.1	Statement of		5.1	Liquidity Risk Governance and
3.2	MAM	36		Financial Position	50		Management Framework	58
3.3	BFS	38	4.2	Loan Assets	52	5.2	Management of Liquidity Risk	60
3.4	CGM	40	4.3	Equity Investments	54	5.3	Funded Balance Sheet	62
3.5	Macquarie Capital	43				5.4	Funding profile for Macquarie	63
3.6	Corporate	45				5.5	Funding profile for the
				Bank Group	67
3.7	International Income	47
			5.6	Funding profile for the
							Non-Bank Group	70
						5.7	Explanatory Notes
							Concerning Funding Sources
							and Funded Assets	72

08	09
Glossary	Ten year history
8.1 Glossary	90 9.1 Ten Year History	98

01

Result

Overview

FreeWire Boost Charger, United States

Part of the Macquarie Capital Venture Studio portfolio, FreeWire Technologies is a leading manufacturer of next-generation electric vehicle (EV) charging and battery-integrated power solutions for grid edge applications.

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

1.1 Executive Summary

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

32 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 16,000(1) people globally, has total assets of $A245.7 billion and total equity of $A22.4 billion as at 31 March 2021.

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 and 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 52-year record of unbroken profitability.

Macquarie acts primarily as an investment intermediary for institutional, corporate, government and retail clients and counterparties around the world, generating income by providing a diversified range of products and services to our clients. We have established leading market positions as a global specialist in a wide range of sectors, including resources and commodities, renewables, conventional energy, financial institutions, infrastructure and real estate and have a deep knowledge of Asia-Pacific financial markets.

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.

$A3,015m

Macquarie now employs over 16,000(1) people	FY2021 profit
globally across 32 markets
EMEA ~15%
Americas ~16%
Asia ~25%
ANZ ~44%
1969	2021

1. This figure includes staff employed in certain operationally segregated subsidiaries (OSS). Unless otherwise stated, further references to staff data and policies do not include those in OSS.

10