Macquarie Bank Limited European focus operational briefing and general update Presentation to investors and analysts 14 September 2007
Disclaimer This material has been prepared for professional investors. The firm preparing this report has not taken into account any customer’s particular investment objectives, financial resources or other relevant circumstances and the opinions and recommendations herein are not intended to represent recommendations of particular investments to particular customers. All securities transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk. Due care and attention has been used in the preparation of forecast information. However, actual results may vary from forecasts and any variation may be materially positive or negative. Forecasts, by their very nature, are subject to uncertainty and contingencies many of which are outside the control of Macquarie Bank Limited (Macquarie). 2
Richard Sheppard Deputy Managing Director Introduction and NOHC update European focus operational briefing and general update Deputy Managing Director Presentation to investors and analysts 14 September 2007
Agenda 1. Introduction and NOHC update Richard Sheppard 2. General update Allan Moss 3. Overview of European operations Greg Ward 4. Investment Banking Funds Jim Craig Corporate Finance & Advisory 5. Real Estate Mark Baillie 6. Glossary 4
Proposed establishment of Macquarie Group Limited (NOHC) on track � We are on track — Formal APRA approval received — Court orders convening the meetings of shareholders and optionholders received — All necessary private tax rulings and draft class rulings received — Provisional ratings received. Definitive ratings will be applied by the Rating Agencies upon establishment of Macquarie Group Limited S&P Moody’s Fitch Macquarie Group Limited A- A2 A (NOHC) A1* Macquarie Bank Limited A A+ *Positive ratings outlook post restructure — MBL short term ratings remain unchanged at A-1 / P-1 / F-1 — Commitments obtained for a term bank facility of $A8b from a syndicate of major international and Australian banks — The proposal remains subject to the approval of the Federal Treasurer. Relevant applications have been lodged. — EGM on 25 October to seek shareholder and optionholder approvals 5
Proposed establishment of Macquarie Group Limited (NOHC) on track � Macquarie’s strong emphasis on risk management to continue to apply throughout the Group � Macquarie Group Limited will be regulated by APRA as a NOHC � As previously advised: — No major change to senior management or business strategy — No significant release of capital anticipated � Further details to be contained in Explanatory Memorandum to be sent to shareholders in late September 6
Allan Moss Chief Executive Officer General update European focus operational briefing and general update Presentation to investors and analysts 14 September 2007
Comment on global market conditions � Credit markets — Significant deterioration in global debt capital markets’ ability to transact and fund structured debt — Funds managers and other intermediaries are preserving liquidity – sharply reduced appetite for financial intermediary term investments — Banks are now funding much of what used to be placed in the non-bank sector — Transaction levels are lower — Credit spreads have widened and cost of funds has increased — Credit markets are distinguishing much more between regulated and non-regulated financial intermediaries — Quality funding transactions are still taking place on satisfactory terms � Equity markets — High volatility in equity markets globally — Very high trading volumes in Asia and Australia (retail and institutional) — Future impact of credit market disruption is uncertain 8
Comment on global market conditions � Industry transaction flow — M&A cautious — ECM subdued — Reduced private equity activity � Global real estate — US residential prices have suffered and volumes have fallen — Rising spreads affecting mortgage rates generally — Investor interest remains strong across all non-residential sectors — Upturn in Australian east coast residential ‘inner ring’ — Significant funds available for appropriate investment � Volatility positive for most global financial markets activities except in debt capital markets where transaction volumes, liquidity and debt book positions have been impacted by broader market turmoil � Australia and Asia much less affected than US or Europe � Continuing competitive environment for staff 9
Conservatively capitalised and operating very profitably � Conservatively capitalised — Tier 1 capital ratio at 31 August in excess of 15% � Well funded � All Groups are operating profitably � No unusual provisions or write downs � Businesses are diversified by product and geography � Continuing to grow staff – currently approximately 11,000* � Held For Sale assets on balance sheet: $A628m at 31 August 2007 ($A1,370m at 30 September 2006) — Expect to realise for greater than book value � Risk-weighted asset growth slower � Expect strategic opportunities in the current environment * At 31 August 2007 10
No unusual trading exposures � Main business focus is making returns by providing services to clients rather than by principal trading � No material exposures not already known to investors � No problem trading exposures � No material problem credit exposures � No exposure to Structured Investment Vehicles (SIVs) � Only modest holdings of AAA and AA rated CLOs and CDOs ($US300m approx) � No problems with debt underwritings � No underwriting of leveraged loans � Very little underwriting of corporate loans � Only modest credit exposures to the hedge fund industry 11
MBL has a long standing policy of granting very few standbys or warehouses � Minimal standby facilities to conduits : — $A255m at 31 August 2007 (zero drawn, $A255m undrawn) — $A275m at 31 March 2007 (zero drawn, $A275m undrawn) � Liquidity policy is to very substantially pre-fund any standby facilities and hold in liquid assets � Warehouse commitments are client related and high quality � Warehouse facilities also very substantially pre-funded Warehouse commitments 31 August 2007 31 March 2007 Total ($Am) Drawn ($Am) Undrawn ($Am) Total ($Am) Drawn ($Am) Undrawn ($Am) Insured prime residential 1,450 925 525 1,450 708 742 mortgages Motor vehicle leasing 828 620 208 835 644 191 Other* 395 186 209 395 306 89 Total 2,673 1,731 942 2,680 1,658 1,022 All warehouse assets are either Australian or New Zealand assets. * Other: Warehouse collateral includes non-conforming auto & RMBS loans, commercial property 12 loans and commercial lease & hire purchase receivables (including some vehicles within mixed pools).
All Groups operating profitably � Investment Banking Group — M&A and ECM pipelines reasonable — Very strong M&A completion in first quarter (to June) — Australian ECM activity lower than first quarter - partly seasonal — Solid pipeline in Asia — Cash equities – excellent volumes in Australia and Asia — Profitable asset sales in progress — Continued growth in Investment Banking Funds and assets performing well (See slides 17-18) � Equity Markets Group — Benefiting from current volatility — Generally high trading volumes in Australia and Asia 13
All Groups operating profitably � Treasury and Commodities — Benefiting from current volatility — Increased volumes across most businesses except Debt Markets � Real Estate Group — All major businesses continue to perform well — Some profitable disposals completed — Continued growth in Real Estate Funds and assets performing well (See slides 17-18) — Well positioned to capitalise on counter-cyclical opportunities associated with stress in some market sectors 14
All Groups operating profitably � Financial Services Group — Record retail broking volumes — Large June quarter inflows into Wrap and Cash Management Trust due to superannuation reforms ($A17b) — Seasonal outflows post June 30 as expected — CMT up 26% from $A14.1b (31 Mar 2007) to $A17.7b (31 Aug 2007); Wrap up 13% from 23.2b (31 Mar 2007) to $A26.2b (31 Aug 2007) � Funds Management Group — Good fund performance relative to benchmarks — Credit funds performed especially well relative to market � Banking and Securitisation — Record volumes in margin lending but expecting more subdued growth for remainder of the year — Launch of credit card business in April 2007 — Deposit volumes well up — Challenging funding markets for mortgages - see slide 16 15
Mortgage business – challenging funding markets but high quality assets � The mortgage business contributed approximately 1% of MBL profit^ for year to 31 March 2007 � Credit quality is high across all mortgage books � No lending on subprime mortgages � Default rates low by industry standards � 95% insured � Cost of funds has increased relative to prior periods � Term issuance market is challenging ^ Percentage contribution based on management accounts before unallocated corporate costs, profit share and income tax. 16
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