MQG - MACQUARIE GROUP LIMITED

[nipper]

In the wake of the financial crisis,

Macquarie began evolving its business model to take advantage of the new environment. Assisted by the Australian government guarantee of its debt, Macquarie was able to swoop in and, where other players were struggling to get funding at a reasonable price, Macquarie was able to buy troubled assets at deep discounts,

 

In the last decade Macquarie has made more than 20 big deals, spanning renewable energy, aircraft leasing, energy, lending and advisory services. As a result, Macquarie is more accurately now described as an asset manager ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ and one of the world's largest in the infrastructure space.

 

MQG has benefited from the powerful trend of ever lower rates since the GFC that pushed investors inexorably into assets such as infrastructure, which offered reliable income. It served to drive valuations higher.

 

The infrastructure asset management business now accounts for the bulk of Macquarie's earnings. The tailwind of lower rates has been so strong that the potential for rising global bond yields could hit infrastructure asset valuations..

- It is reported the Macquarie CMA is used by a quarter of SMSFs, as historically it has been the most flexible cash account out there. This is changing as other players see what a wonderfully stable source of deposits this can be (believe me). Also, now they are getting greedy, dropping the interest rate more in line with other banks.

[rog]

I think that Macquarie Banking (MBL) is separate to MQG.

[nipper]

MBL is the old code. The CMA, formerly a Trust, is part of the Group. Part of that reconfiguring was to allow for all those $$'s sloshing around to come under the ADI umbrella and thus allowing the Govt guarantee to apply. And, boost the balance sheet, and allow to borrow and thus buy all the assets that have subsequently boosted the SP. The 'higher interest rates' advisory still applies.

[nipper]

It's 10 years this month since Nicholas Moore took the top job at Macquarie and he will reveal today that the bank has never been in better shape. The full-year accounts to be published today are expected to show Macquarie's profit for the 12 months to March should be nearly $2.5 billion.

 

The market's consensus, according to Bloomberg, is $2.47bn but Morgan Stanley sits above that with its call of $2.49bn. A result of that size would well exceed the $2.2bn recorded last year and the composition of the figures will be analysed closely. The bank's stock last night closed at $107.75, which remains a record high.

https://www.theaustralian.com.au/business/d...678bdbe1dcde954

 

 

[blacksheep]

Broke though the $100 barrier today - last time it was this close was 2007 when it briefly hit $98.64. Shortly after we had the GFC, which saw the SP go to a low of $24. Taken 10 years to get back

 

Updated chart - SP now $122.48.

https://www.shortman.com.au/stock?q=mqg

[Mags]

It's been a nice ride. I got on board around $50 on the way down, went in on the capital raising at ~$26 IIRC.

 

Doesn't seem to have got it's hands too dirty in the RC so far.

[blacksheep]

Macquarie still appears to be part of this ongoing investigation - https://www.bloomberg.com/news/articles/201...ce-german-probe

 

This investigation first surfaced back in 2014

 

The authorities are focussing on trades known by the moniker "cum/ex," a nod to how the trades are structured around the specific timing of dividend payments. The transactions typically involve banks, brokerage firms, hedge funds and wealthy individuals entering into agreements to buy, borrow and sell shares during a brief window of time around a dividend payout, the people said. The carefully coordinated timing of the transactions has produced tax-credit boosts for clients and fees for the banks, lawyers and traders said.

 

Lawyers and industry officials said that in a typical cum/ex trade, one party, say a hedge fund or brokerage firm, agrees to sell or loan securities just ahead of a dividend payment using an investment bank and sometimes another broker. Another party, in a different country, generally is lined up to buy the shares. "Cum" and "ex" refer to whether a dividend is factored into the price of the underlying stock.

 

The transactions are dizzyingly complex. They hinge on a lag between when stock loans and other trades are initiated and when they are considered completed, which is the result of wrinkles in the way many stock-market transactions are routed and processed. The result is that multiple parties can appear to simultaneously have owned the shares at the time of the dividend payout.

 

In some countries, dividend recipients are entitled to tax credits-akin to a voucher-to compensate them for taxes that theoretically would have been withheld from the original dividend payout. Lawyers say cum/ex trading strategies routinely have relied on more than one party appearing to tax authorities that they are owed credits, even if neither party actually paid a tax bill.

 

That means that international tax authorities have sometimes ended up doling out duplicate tax credits. The investors, bank and broker involved in the transactions divvy up the proceeds. Banks routinely amplified the trades by providing leverage, which boosted profits for all parties, lawyers and industry officials said.

 

https://www.theaustralian.com.au/business/l...5c4f4de5e39bb0b

[Mags]

Interesting.

 

Kinda like how the super fund managers never report the franking credits the members earned........

[blacksheep]

Macquarie Group Limited update on German lending transaction in 2011

SYDNEY, 28 September 2018 ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ Macquarie Group Limited (ASX: MQG; ADR: MQBKY) (MGL) has

received a number of media enquiries about a transaction that is the subject of civil litigation in the

Munich District Court and is also being investigated by German authorities.

 

Macquarie Bank Limited (MBL) was a lender to a group of independent investment funds in 2011. The

funds were trading shares around the dividend payment dates where investors were seeking to obtain

the benefit of dividend withholding tax credits. The investorsÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢ credit claims were refused and there was

no loss to the German revenue in relation to this matter.

 

In relation to the civil case, two of the investors have already sued the Swiss bank that introduced them

to the investment. They and other investors have now sold their claims to a German litigation Special

Purpose Vehicle controlled by the same lawyer who acted in the litigation against the Swiss bank.

Earlier this year, that vehicle brought a claim against MBL seeking ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’‚¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¬30 million in damages. MBL

strongly disputes this claim, noting that it did not arrange, advise or otherwise engage with the

investors, who were high net-worth individuals with their own advisers. Many, if not all, had previously

participated in similar transactions

.

The Cologne ProsecutorÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s Office (CPO) is investigating the transaction. Although no current staff

members have been interviewed by the CPO to date, we understand the CPO will want to interview the

individuals involved in the transaction, which may number up to 30 people. This is expected to include

staff involved in the approval process, among them the MGL Chief Executive Officer (CEO) and the

CEO designate. In order to interview all these individuals, they are likely to be formally classified under

German law as persons of interest or suspects.

 

The CPO and other German authorities are also investigating many other transactions that occurred

around this time and earlier which did not involve MBL.

 

Macquarie will continue to cooperate fully with the German authorities. Macquarie notes that it has

already resolved its two other matters involving German dividend trading that took place between 2006

and 2009, where the authorities noted MacquarieÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“unreserved cooperationÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ÂÂ.

 

The total amount at issue with the CPO is not material and, as previously notified, MGL has provided for

these matters. Macquarie was one of over 100 financial institutions involved in this market, from which it

withdrew in 2012. As part of a robust review process at the time, Macquarie received extensive external

legal advice in relation to its involvement and believed that it was acting lawfully.

[nipper]

Wrapped in the Motley Fool spin is a kernel of reality

The size of [ ] falls may be the fault of the big banks, but I still think house prices would be falling even without the effects of the Royal Commission.

 

Foreign buyers have been pushed largely out of the market by higher government fees, more scrutiny and capital transfer limits by the Chinese government.

 

There has long been a prediction of apartment oversupply because of excessive construction. We are still going through this with more apartments being finished.

 

A very large amount of interest-only loans are expiring and switching to principal and interest repayments. This is believed to increase borrower repayments by around 30% a month, which may be unaffordable for some.

 

Today, the AFR is reporting that Macquarie is ending its âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‹Ã…“Bank of Mum and Dadâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢ financing and borrowing for self-managed super fund property investments. Family loan guarantees are no longer offered as of yesterday and lending to SMSFs for residential property will end by the end of April.

 

Macquarie said that technological and operational complexity of its white label business and the new regulations from the Royal Commission led the bank to make the decision to leave that segment.

 

Foolish takeaway

 

I think itâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s probably a good move by Macquarie because the property market is heading downwards and this could raise the risk of bad debts for Macquarie.

 

Macquarie seems like a well-run ship with very competent management making good decisions to me,

but really, only a small part of their biz, and..... 2008, they were the first to pull the plug then, (others followed,and it all fell down) and will act in their own interest, the hard numbers guys, the bottom line, every time. No difference now

 

Don't believe a headline rate, read the small print. Safety in strength.