Macquarie Group Stock

Very good morning, everybody. Welcome to Alumina and to Macquarie's 2026 Annual General Meeting. I'm Glenn Stevens, Chair of the Board. I warmly welcome you today to the meeting. I know the quorum is present, and so I declare the meeting open.

I acknowledge the Gadigal people of the Eora Nation, the traditional custodians of the land on which we meet and pay my respects to elders, past and present. Today is a hybrid meeting, and so that allows us also to welcome shareholders joining online from around the world.

To ensure the meeting is conducted in a courteous and respectful manner, can I remind you, both here in person and online to observe the conduct rules that we set out in the Notice of Meeting. We can't accept disorderly conduct. Please don't do that. If there is disorderly conduct, you'll be asked to leave.

With me up here on stage are our nonexecutive directors, Rebecca McGrath, Phil Coffey, Susan Lloyd-Hurwitz, Jillian Broadbent, Mike Roche, Michelle Hinchliffe and William Vereker, our CEO, Shemara Wikramanayake, CFO, Frank Kwok; and Company Secretary, Simone Kovacic. Also in the room are our bank-only nonexecutive directors, Ian Saines, David Whiteing and Wayne Byres and present in the room or online are the Macquarie Bank CEO, Stuart Green, group heads, Simon Wright, Greg Ward and Ben Way, Michael Silverton, Nicole Sorbara, Andrew Cassidy and Evie Bruce.

Shemara will shortly take you through the 2026 full year results, she'll should provide a first quarter 2027 update and then speak to the outlook for the 2027 financial year. We'll then hear from directors seeking election or reelection to the Board today. That's William Vereker and Susan Lloyd-Hurwitz. Following that, I will formally open the polls. And then we will take a break as we customarily do, and we look forward to meeting those of you who are here in person during the break. After the break, we will reconvene to address the formal items of business on the agenda and take questions. If you're participating online, you can start to send your questions in now, and we will address them during the formal business of the meeting.

Let me turn briefly to financial results. And for the year, Macquarie delivered a profit of $4.8 billion in fiscal '26, and that's up 30% on the preceding year. Each of the 4 operating groups contributed to that improved results, and that says something about the breadth and diversity of the group's businesses. The return on shareholders' funds was 14%. That's up from around 11% in the preceding couple of years. And it's broadly in line with what Macquarie has typically achieved over the past decade.

Looking forward, a disciplined approach, including being willing to reallocate capital towards those activities most likely to offer attractive risk-adjusted returns remains key to ongoing improvement. The company ended the year in a strong position with surplus capital at the group and bank levels. And with Macquarie Bank Common Equity Tier 1 capital of 12.8% of risk-weighted assets as per the APRA standards or 17.5% as measured on a strict Basel III basis at 31 March 2026. The Board declared a final dividend of $4.20 per share, making for a total dividend of $7 per share for the full year. The Board has also resolved to issue shares on market to satisfy the Dividend Reinvestment Plan for the final part of the dividend, and that's at a discount to the prevailing market price of 1.5%. The Board also resolved to conclude the on-market share buyback.

Turning to risk culture. Our remediation work, the past regulatory and compliance shortcomings continues and there's been good progress both on platform and data upgrades and on regulatory engagement. We seek to uphold the highest standards in meeting the expectations of markets, customers, clients and regulators. If something goes wrong, then we have to report that issue, and we do. We engage constructively with our regulators fix the problem and then apply the learnings across the organization.

Speaking up as part of the culture. We do value listening, and we value what our people have to say. And there are various ways for staff to raise their concerns, and we take pride in the approach we take to that when issues are raised.

I'd like to talk a little about sustainability. Macquarie is well positioned to continue to play a constructive role as a financier, an adviser, an investor and a fiduciary in the sustainability space, and we expect that to the benefit of shareholders. We do have this year the proposed resolutions, requisition by a group of shareholders and their items 5a and 5b on the agenda. The Board's response to each of those resolutions or those proposed resolutions is set out in the notice of meeting and in the explanatory materials, including our recommendation that shareholders vote against both those resolutions.

As we stated last year, the Board does not believe that constitutional amendment, as proposed in item 5a would improve the ability for shareholders as a whole to provide feedback on how the company is managed. Item 5b is an advisory resolution that will only be put to the meeting if Item 5a is passed.

I should say that Macquarie remains committed to the goals of the Paris Agreement. Our long-standing view, and we've articulated this for many years now, is that an orderly energy transition is the only way to balance availability, affordability and emissions reduction. Macquarie continues to foster investment in green energy and climate solutions. There's over $30 billion of such assets now on the MAM platform, where we invest alongside our clients over the full life cycle of assets, and we remain focused on supporting real-world emissions outcomes by scaling investment in green and climate-resilient assets and by working with clients across carbon-intensive sectors to decarbonize their operations in a practical and sustainable way.

I'd like to make a few remarks about KPMG. As you will recall, we announced in May 2024, 2 years ago now that we had decided to tender our audit services every 10 years and that the first tender would be conducted no later than 2026. We did indeed conduct the tender in 2025, and we informed the market in November of 2025 that KPMG had been selected as our recommended auditor for the financial year beginning in 2028. And that, of course, is subject to regulatory consent and are subject to your approval with shareholders at next year's AGM. Subsequent to that announcement, as you've no doubt read KPMG has been the subject of intense scrutiny. Obviously, we continue to monitor that situation very closely.

Regarding the tender process that we undertook, that commenced in March of 2025 and the competitive process attracted 4 highly capable credentialed audit firms, each of which could have been suitable or was suitable to tender for the role of our global auditor. The management team designed and operated the process. The Board approved appropriate protocols, including oversight by the Board Audit Committee and the appropriate role of Michelle Hinchliffe, our Audit Committee Chair.

As the process continued, the field of tendering firms was progressively narrowed down to 2 on the basis of management scoring against preset criteria and management's unanimous recommendation of who the final 2 firms should be. That was endorsed by the Board. From the 2 firms, KPMG was eventually selected as the recommended auditor. And as I said, that's subject to -- that was following final selection presentations, which the Board attended and subject to approvals before that can be activated.

Let me be clear about what Michelle's role was and what it wasn't. She is a highly respected former audit partner with a long tenure at KPMG prior to joining Macquarie's Board in 2022. Michelle attended an equal number of presentations for each tendering firm, but she recused herself from any scoring of any of the firms and from the decision process where the Board came to a decision to appoint KPMG. So we remain confident that the process that we ran was a robust one and that we found the right balance between using Michelle's highly developed skills, which are very beneficial for the company and very beneficial in ensuring we have a good tender and managing her potential conflicts resulting from her previous employment, which were all fully disclosed and managed.

Where does this stand at the moment? The Board has made formal inquiries of KPMG and may include regarding KPMG's ongoing capability and capacity to deliver the audit given that some people have left that firm and an assessment of the integrity of KPMG's pursuit of our audit tender process, and that's to be supported by an external review conducted by Allens with a scope that has been agreed by Macquarie management. We'll keep shareholders informed as this matter unfolds over the period ahead.

I'd like to turn to the Board now. In February, William Vereker to my left, who you'll hear from shortly joined the Board as an independent director. When he was based in Europe, he brings considerable global experience in financial services, both as an executive and as a director. Jillian Broadbent has decided to step down from the group and bank boards in December this year, having served for 8 years. And I'm very grateful for Jillian's significant contribution to the Board over that time including as Chair of the Remuneration Committee. Susan Lloyd-Hurwitz, who's been serving on the Board for 3 years now offers herself for reelection to the Board. And if reelected, Susan will assume Chair of the Remuneration Committee as Jillian departs and Sue will pick up that role effective August 1.

Now you will have seen that this morning, we announced that Greg Ward, who leads our Banking and Financial Services business will succeed Shemara as Macquarie Group Managing Director and CEO later this year, subject, of course, to the receipt of necessary regulatory approvals. On behalf of the Board and the Macquarie team, I want to pay tribute to Shemara for her significant contributions to Macquarie over almost 40 years, not least over the past 8 years as CEO. In that time, she's delivered significant growth and momentum. She steered Macquarie through expansion into new markets through the dislocation of COVID, through other massive geopolitical events, some of which we're still living through.

She's greatly enhanced the brand recognition of Macquarie and the value that we bring to our clients and communities. She's done all that with remarkable strength and incredible growth. And I have to say an unwavering commitment to the company, to its people, to its businesses and to its ethos and its culture. So Shemara, we salute you for that. Thank you for your incredible service for the organization over so many years.

I can say that the Board's nonexecutive directors who oversaw the process of selection were unanimous and deciding to appoint Greg as Shemara's successor. He's a 30-year veteran of Macquarie, including 14 years as our global CFO, including through some interesting times like the Global Financial Crisis. And of course, he has led the BFS business transforming that to be the market leader and source of innovation and competition that it is in the market today.

The Board is excited at the prospect of working with Greg and the whole management team as they write the next chapter in Macquarie's remarkable story. So it's my honor having paid tribute to Shemara and congratulating Greg on his new role. It's been my honor to do that. They'll be working closely together on a transition over the next several months. And I'll shortly invite Shemara to say a few words on that news before handing over Greg to make some comments and Shemara will then discuss the FY results in more detail and update you on recent performance.

And with that, can I thank my colleagues on the Board, the staff and this outstanding management team for your amazing efforts over the past years. Fellow shareholders, that concludes what I want to say right now. Thank you for your attention and your continuing support of Macquarie. I'll hand to Shemara. Thank you.

Thanks, Glenn, and good morning, everyone, from me as well. Thank you for joining. And before I go through the results, let me just say it's been a huge privilege for me to work with a lot of the 80,000 people who contributed to making Macquarie what it is today, including just over 19,000 people who work for us right now. And I wanted to say huge thanks to them. Part of the reason I've stayed so long is because it's been an incredible intellectual and social stimulation to come in to work every day and work with all these people using our deep expertise to have impacts in communities.

And I was reflecting that it's amazing just over 40 years ago when I joined or it was 40 years ago, near 39 and a bit, but we were earning $12 million at the time, which was quite an achievement for a little Aussie business with 300 people in it. Today, as Glenn just mentioned, we've earned just over $4.8 billion. So it's a 400x growth in earnings, which is amazing, and we're in 33 global markets. And the thing I'm most proud of is all the franchises. Our teams have built, pioneered infrastructure as an asset class here for investors with a few others and are now the largest manager in that sector in the world, plus in real assets with Greg and his team, we built a leading digital bank, not just in Australia, but globally.

Our commodities and financial markets business is quite unique in regulated banks around the world in terms of the global commodities, financial markets and asset finance business we have and then Macquarie Capital as well, where we not only provide advisory and capital market solutions, but bring debt and equity to drive results for investors and supported by our incredible 4 central service groups. But I think the most exciting thing is the huge runway that the business still has from here in all of those areas. And I did want to remark that our culture has been critical, our unique culture to driving that. And we'll be going forward where we empower this entrepreneurialism and innovation together with a disciplined risk framework of taking accountability for identifying and owning risks and thinking about long-term integrity and impact on stakeholders.

And I think as we scale, it gets more challenging to have that nimbleness and responsiveness, and that's why I'm so pleased, Greg, that you're stepping up, having worked with you for 30 years to take on leading our incredible teams together with the leadership we have, to respond to those challenges and deliver on the opportunities. And also, I think what I'm excited about is the fresh perspectives that you will be able to bring now with the teams as we go to the next and next chapters and lift the business to the next height.

So I might just hand over to you, Greg, if you don't mind, to make a few comments to our shareholders before going through results.

Well, thanks very much, Shemara. Thanks for the opportunity to speak to and thank you, Chairman, for the opportunity to speak to shareholders. I just want to say I'm incredibly humbled to have been chosen by the Board to lead this wonderful organization on our next phase of growth. I want to pay tribute to your amazing career, Shemara, 40 years is extraordinary. You've done wonders for the business and our team. Your career as the -- your tenure as CEO has been highly successful and a challenging one in terms of global events, as Glenn said, the momentum that we have across the platforms, as you've heard from the Chairman, today is fantastic.

We are incredibly well set up for the future. We've got an amazing senior leadership team here, which I'm really pleased about. And of course, we've got a 19,000 strong organization all around the world, some incredibly inspiring people and I'm looking forward to working with that team to continue the Macquarie story of observing our communities and serving our stakeholders all around the world, and I hope I can continue to deliver outstanding returns for shareholders. Thanks very much.

Thanks, Greg. So with that, I'll turn now to the usual business we have of going through our results for the last financial year. How we're going for this most recent quarter and the outlook. And so starting with the history, as you saw, after 57 years of unbroken profitability since inception, we delivered a result of $4.847 billion this last FY '26 year that you can see in this slide, was up 30% on the $3.715 billion we delivered the year before, and our return on equity was up 25% to 14%.

Pleasingly, all 4 of those business lines I talked about, our operating groups grew their earnings, and I'll go through in more detail what drove it, but in Macquarie Asset Management, principally increased performance fees, banking and financial services, ongoing growth in our books, subject to margin pressure. Macquarie Capital, we had increases across the business in our fee income, but also returns from the debt and equity books and in Commodities and Global Markets, we had increased from both the risk management, but also the inventory management and trading in the commodities business and in the asset finance, we had 1 particular large divestment.

So before I step through the groups, let me also just note the global diverse footprint of the business, we now earn roughly 30% each of our income in Australia, the Americas and Europe, Middle East and Africa and about 10% out of Asia. And as Greg and I have both mentioned today, we have just over 19,000 people delivering that and another 265,000 people in our asset management business also working to deliver the results we do.

So looking at the businesses, Macquarie Asset Management, as you can see, they delivered 2.602 billion, that was up 27% on the year before. And some of the key things there noted in the right-hand column, we raised capital at just over $20 billion, and we have just over $21 billion now to deploy in our private markets business and in our public investments where we divested our North American and European business, we've had ongoing growth there with $19.3 billion of positive flows into that business. So Macquarie Asset Management, great result last year and good momentum.

Same with Banking and Financial Services, it was up 17% to $1.6 billion, continuing the trajectory of year-on-year growth. We had meaningful growth last year. So you can see, again, in the box on the right that our home loan portfolio was up 28%, supported by a 25% growth in our deposits and we also had an 8% growth in our business banking and our funds on the platform were also up. So again, great franchise, great trajectory, growing really well.

Commodities and Global Markets had a very large step-up of 49% to $4.221 billion. And as I said, the underlying businesses there grew really well. In commodities, particularly we had really good risk management income in Global Oil and Global Gas and Power and inventory management and trading increased income in North American Gas and Power and in financial markets as well across the board, strong client activity in FX rates, solid contribution in futures, increase in equity derivatives. Our asset finance business, particularly made a large contribution with that onstream meters platform that we acquired, restructured and divested and also the book there grew 25% from $6.1 billion to $7.6 billion. So again, great performance, great franchise set to grow.

And Macquarie Capital, also a 43% increase to $1.491 billion. We had really good fee income in terms of our -- particularly our brokerage income led by Asia. And we also had our private credit book a step-up to $27.3 billion and our equity investing book at $5.2 billion. So a good year there as well from a great business. They were supported, obviously, by very strong funding and capital, our balance sheet with our term funding exceeding our term assets comfortably as ever, a 12.8% CET1 ratio and $9.3 billion of surplus capital and all our ratings with the 3 major rating agencies also very strong. And in terms of the return we delivered on capital, as I mentioned, we did 14% across the whole business. That was made up of a 21% return from Macquarie Asset Management and Banking and Financial Services together, consistent with the 20-year record of 21%. And a 19% return from Commodities and Global Markets and Macquarie Capital, which was up on the 17% 20-year return. So after we take account of the $2.9 billion capital in the corporate level, and the $9.3 billion surplus that made 14% net.

Now turning to this most recent quarter. We also had -- we had satisfactory trading conditions, but most of our groups were up on their prior comparable period. Macquarie Asset Management was the one that quarter-on-quarter was down, and that's basically because of the divestment of the North American and European public investments business in the second half of last financial year.

But BFS was up on the prior comparable period, again, driven by volume growth in our loan portfolios and our deposits, partially offset by lower margins and that was due to changes in the portfolio mix because of the exit of the car leasing, but also deposit competition in terms of funding costs. CGM net profit contribution was substantially up on the prior comparable period, and that was from increased income in commodities, where we had a much more subdued prior comparable period because of the Liberation Day tariff impacts on markets in the prior comparable period. And we also had an increased contribution from the Asset Finance business, again, mostly due to higher activity. And lastly, Macquarie Capital also contributed up on prior comparable period, again, driven by investment-related brokerage income, but partially offset by lower advisory fees because we had a strong prior comparable period.

Now just going through each of those groups in a little bit more detail, Macquarie Asset Management, we've got $748 billion of assets under management, which is up 4% on where it was at the end of last year. We had about $4.2 billion of capital raised in the private markets and $9.3 billion of net flows again into public investments. We've got some large transactions completed there, which is the divestment of our Mexican REIT FIBRA. And we made an acquisition as well of a European CLO manager called Spire.

So that franchise continuing to grow over this quarter. Same with Banking and Financial Services, home loan portfolio up 6%, the business banking portfolio up 3%. Our deposits up 4%, our funds on platform up 5%, so ongoing growth in the franchise there as well. Commodities and Global Markets, as I mentioned, increased substantially on the prior comparable period and that was mostly from commodities driven by increased trading activity in North American Gas and Power and also from the asset finance book due to one-off activity, but strong contribution consistently again from financial markets. And then Macquarie Capital, as I said, higher investment-related and brokerage income, partially offset by lower advisory fees because that's strong prior comparable period. Our loan and equity books are holding at where they were at the end of last year.

In terms of capital and funding and liquidity, again, we remain very strongly funded and capitalized 13.8% is our Basel III CET1 ratio. And the business has generally been absorbing capital in growing the business apart from in commodities and global markets. You'll see there on the bars on the right-hand side of the slide, there was a large release of capital due to the divestment of the onstream meters platform in asset finance. But apart from that, Macquarie Asset Management, continuing to invest in new strategies through funds and co-investments, BFS absorbing capital and growing the loan books, et cetera, Macquarie Capital, as I said, broadly flat on equity and debt. And then in terms of regulatory update, we've noted there the work we're doing with our key regulators and also on the situation in Germany.

So I'll turn with that to just touching on the outlook for this financial year. And it's broadly consistent with what we've shared group by group, Macquarie Asset Management. As we said, we expect base fees to be broadly in line, excluding the divestment of the North American and European public investments business last year, but we expect net other operating income to be up including the divestment of our Macquarie AirFinance business that we are in the process of closing shortly.

Banking and Financial Services, driven as ever by the growth in our loan portfolios and our deposits subject to, of course, market conditions and customer activity and also impacted by market dynamics in terms of competition and the portfolio mix driving lower margins. Macquarie Capital, subject to market conditions, again, we said that we expect an action activity plus investment-related income to be broadly in line with FY '26, but weighted to the second half of the year, particularly in relation to the equity realizations.

And then in Commodities and Global Markets, again, subject to market conditions. We expect our net operating income to be broadly in line with the last financial year, but that's excluding, of course, the one-off positive impact we had from the divestment of the onstream meter portfolio last year. And at the corporate level, we expect our compensation ratio and our effective tax rate to be basically broadly in line with historical levels. Now these guidance indications that we've given as ever subject to a range of factors. So market conditions where there's a lot happening, obviously, in the world, volatility, et cetera, completion of period-end reviews and completion of transactions, the geographic mix of our income and foreign exchange impacts and potential tax and regulatory changes that may happen.

And that's why we continue as ever to maintain a cautious stance in terms of our conservative approach to capital funding and liquidity and that should position us well to contribute together with our strong operating platform that we continue to invest in our disciplined risk management approach and our funding and capital positions, which, as you can see on this last page in terms of medium-term outlook, we think position us to continue to deliver over the medium term as we have for decades, particularly with those 4 very diverse franchises I talked about. So with that, I will hand back to our Chairman, Glenn to conduct the rest of the meeting.

Thank you very much, Shemara. What we're going to do now is play a short video on how to vote and the process for asking questions at the meeting.

[Presentation]

And thank you, Simone, for those very clear instructions. Let's turn now to the formal business. The Notice of Meeting and explanatory notes have been sent to shareholders. So I'm going to take those as read. The items of business are as on this slide. The Board recommends that shareholders vote in favor of Resolutions 2, 3 and 4 and against Resolution 5a, should Items 5b and 6 be put to the meeting. The Board recommends that shareholders vote against those conditional resolutions.

Item 1 is to receive and consider the financial report, the director's report, the sustainability report and the auditor's report of Macquarie for the financial year ended 31st of March 2026. There's no formal resolution for that item.

Items 2a and 2b are the reelection of Susan Lloyd-Hurwitz and the election of William Vereker as voting directors. They will each address the meeting before the break.

Item 3 is the annual nonbinding vote on the remuneration report, which is in the 2026 Annual Report. Our shareholders that are familiar with the company will know that the remuneration framework is long-standing and it's designed to motivate staff to grow the businesses, to identify new opportunities and to be accountable for their decisions and behaviors, including risk management, customer economic and broader consequences of their actions. We see that and continue to see that as a key driver of Macquarie's success over the long run.

Now you'll recall that last year's meeting, just over 25% of the votes were cast against the remuneration report, constituting what the Corporations Act calls a first strike. The Board took that feedback very seriously, and we've worked hard over the past year to carefully address shareholder concerns. We've reviewed existing remuneration decision-making processes and the disclosure of the remuneration outcomes that we decide. If the remuneration report again today would receive 25% or more votes against, then the Corporations Act requires that a resolution and this is item 6 on the agenda, would be put to shareholders today on whether all nonexecutive directors should stand for reelection at a spill meeting that would need to be held within 90 days.

Item 4 is as usual, to approve the Managing Director's annual participation in the Macquarie Group employee retained equity plan.

Item 5 has been requisitioned by a group of shareholders under the Corporations Act.

Item 5a proposes a change to the company's constitution so that would need to pass as a special resolution.

Item 5b would only be put to the meeting if 5a passes.

As I've already mentioned, Item 6 is a conditional spill resolution that would only be put to the meeting if the resolution to adopt the remuneration report receive 25% or more votes against at this meeting, which would constitute a second strike as defined under the Corporations Act.

If Item 6 is put to the meeting and passed as an ordinary resolution, then all directors other than the Managing Director would need to stand for reelection at a separate meeting that we would have to hold within 90 days. As I said, the Board recommends you vote against Item 6 should it be put to the meeting.

And we're now going to turn to director elections. Item 2a on the agenda is the reelection of Susan Lloyd-Hurwitz, as Sue's been a member -- an independent voting director of Macquarie since June of 2023. She is a member of the Board Audit Committee, the Nominating Committee and the Remuneration Committee. She has significant global expertise in investment and real estate and her deep understanding of Macquarie's businesses continues to strengthen and support the Board's effectiveness as we try to oversee Macquarie's strategy, risk management and governance. The Board is confident that Sue will continue to serve shareholders effectively and recommends her reelection. I'm pleased to address Sue to -- to invite Sue to address the meeting, and she has some leg difficulties today so she is going to do that seated. Thank you.

Thank you, Glenn, and good morning, shareholders. It's a privilege to be speaking to you today in support of my reelection as a Director of Macquarie Group. Since joining the Board in 2023, I've worked closely with my fellow directors and management, including as a member of the audit, nominating and remuneration committees. As a Board member, I've also spent time engaging with staff in Australia and globally on topics that matter to them, including culture, inclusion and how we govern and leverage AI.

This broad contact has allowed me to reinforce company expectations and bring staff insights into Board discussions. The skills and experience I bring to the Board draw on my prior executive and nonexecutive roles. My executive experience over 3 decades spans global investments and real estate sectors across Europe, Asia, the U.S.A. and Australia. I was the CEO of Mirvac Group for 11 years. And prior to that, Managing Director of Europe at LaSalle Investment Management in London. National President of the Property Council of Australia, and Chair of the Green Building Council of Australia and President of Chief Executive Women.

Currently, I'm a Non-Executive Director of Rio Tinto, Chair of the Australian National Housing Supply and Affordability Council. I'm chair of the Australian Center for Gender Equality and Inclusion at Work Advisory Board at Sydney University, a trustee of the Sydney Opera House Trust and a fellow of the University of Sydney, Senate. These nonexecutive and executive roles across diverse industries and sectors, enhance the breadth of judgment I bring to Board discussions and complement the skills and knowledge of my fellow board members.

My focus will remain on effective governance and oversight of Macquarie's global operations. I am confident I will continue to have sufficient time to serve the company and you, our shareholders. And I thank you for your support.

Thanks very much, Sue. Item 2b is the election of William Vereker, who joined the board as an independent voting director in February this year. William is a member of the Audit Committee, Nominating Risk and Remuneration Committees, quite a busy committee load. The Board is already benefiting greatly from his significant experience in global banking, financial services and his regulatory and governance expertise, and we're confident he will continue to make a strong contribution, and we wholeheartedly recommend his election. I'm pleased to invite William to address the meeting.

Thank you, Glenn, and good morning, shareholders. It's a privilege to offer myself for election as a nonexecutive Director of Macquarie Group. Since joining the Board in February this year, I've been familiarizing myself with Macquarie's diverse operations and its people in Australia and globally. I've also been engaging committee work as a member of the Board Audit, Nominating, Risk and Remuneration Committees. Based in Europe, I'm excited to bring to the Board and Macquarie my extensive executive experience across global banking and financial services, regulatory and government affairs.

This experience includes my role as Vice Chair of the EMEA Investment Bank at JPMorgan, as Global Head of Investment Banking at UBS and other senior roles at Nomura, Lehman Brothers and Morgan Stanley. I've also served in public and advisory roles in the United Kingdom including as a member of the U.K. Investment Council and as the U.K. Prime Minister's Business Envoy. I'm currently a Non-Executive Director of a London Stock Exchange Group, where I chair the Board Remuneration Committee, and until earlier this year, I was Chair of Santander UK plc and Santander U.K. Group Holdings plc.

Collectively, my nonexecutive and executive experience has given me broad and deep knowledge in important areas of board governance, international banking and financial services, risk management and organizational change that I believe will be a benefit to the company. If elected, I welcome the opportunity to continue contributing that experience, knowledge and expertise to Macquarie and to support the board in delivering long-term shareholder value. I confirm that I have the time and commitment required to discharge the responsibilities of Macquarie Director and appreciate your support. Thank you for considering my election.

Thanks very much, William. I'm going to turn now to Item 5, as I mentioned earlier. Items 5a and 5b have been proposed by a group of shareholders under the Corporations Act. Their supporting statements are in Appendix B to the Notice of Meeting. The Board does not consider these resolutions to be in the best interest of the company or shareholders as a whole. And so we've set out our reasoning, and we recommend you vote against 5a and 5b, but I now invite Morgan Pickett, a representative of the group of shareholders who have requested resolutions to address the meeting. Morgan. You have the floor.

Thank you, Chair, and good morning, shareholders. I am here to introduce Item 5b, the resolution on climate strategy and management. This resolution was filed on behalf of hundreds of shareholders, both institutional and retail, seeking clarity and accountability. At last year's AGM, more than 35% of votes cast back to stronger climate risk reporting, a clear shareholder signal Macquarie has ignored. This year's resolution asks, does Macquarie remain committed to aligning its financing with net zero emissions by 2050. And if so, how does it assess whether its fossil fuel financing is consistent with that commitment.

The Board's response in the Notice of Meeting failed to answer this simple question. If anything, it reinforces shareholder concerns. Macquarie's long-standing commitment to align financing with net zero by 2050 and has been scrapped and replaced with a vague commitment to the goals of the Paris Agreement with little evidence that this commitment is in any way guiding decision-making of the group when it comes to fossil fuels. The Intergovernmental Panel on climate change has warned that lifetime emissions from existing and committed fossil fuel infrastructure. This was in 2018 would exceed the carbon budget for the Paris agreements well below 2-degree warming limit.

The International Energy Agency concludes that achieving net zero by 2050 allows no new coal mine expansions, new oil and gas fields. Despite this, over the last year, Macquarie has increased its support for a new wave of LNG developments. It has upsized and extended its support for fracking in the Beetaloo Basin, Macquarie has signed multiple 15- to 20-year LNG offtake agreements with yet to be approved projects and is acting as a financial adviser for Alaska LNG described as one of the biggest and most devastating LNG mega projects currently slated globally.

This is not a passive exposure. Macquarie is helping construct the financial architecture for decades of new fossil fuel production and combustion. To justify these activities, the group has stated that under the International Energy Agency's current and stated policy scenarios, more gas will be needed. However, the IEA has made clear, these are not forecasts and should not be considered as the business as usual scenarios.

These models, imagine a hypothetical world where climate policy stalls, clean technology progress slows, renewables uptake flattens and rapid cost declines halt. Naturally, in this imagined world, fossil fuel demand persists, but Macquarie amidst 3 critical facts that accompany these scenarios. These pathways lead to 2.5 to 3 degrees of warming by 2100. This level of warming carries severe systemic risks that should be avoided. And the IEA points to significant LNG oversupply not unmet long-term demand.

Macquarie is treating a scenario where the world reaches severe levels of warming as a business opportunity for fossil fuel expansion rather than treating it for what it truly is, a catastrophe that can and must be avoided. Macquarie's claim that fossil fuels, particularly gas will be required for some time, does not justify financing new long-lived gas fields that are inconsistent with Paris-aligned pathways. The question from a risk management perspective is not whether some gas remains in the system during the transition, but whether Macquarie is enabling new large-scale projects intended to operate for decades.

Exposure to the proposed Beetaloo Basin exemplifies these risks, demonstrating how Macquarie's financing activity undermines the climate goals it claims commitment to and invalidates representations regarding supporting clients to decarbonize. Macquarie's clients Beetaloo Energy Australia and Tamboran Resources are the Beetaloo Basin's leading proponents. They are nondiversified pre-revenue fracking companies with no transition or decarbonization plans.

Their sole business strategy is to develop full-scale Beetaloo production. Macquarie's ongoing catalytic financial support to these companies could enable one of the world's largest frac shale gas basins, a major source of new emissions coming into market in the 2030s and with a commercial incentive to operate 4 decades. There is no indication that Macquarie has assessed this development against the Paris goals. In fact, at last year's AGM, the chair explicitly stated as these projects are still at pilot stage, they have not been assessed for Paris compatibility.

It was only a few years ago, the company CEO was quoted in Time Magazine as saying there's just a lot of change we need to do to stop our planet from burning. One thing Macquarie can do is to stop our planet from burning is to stop pumping hundreds of millions of dollars into what could become one of the world's biggest gas fracking developments. Investors now have more evidence to suggest Macquarie does not assess fossil fuel financing against even its revised core climate commitment supporting the goals of Paris.

Macquarie's near-sighted and cavalier approach to financing fossil fuel expansion is cementing a path where the Paris Agreement fails and warming reaches catastrophic levels. Macquarie is not a passive actor in this, its shareholders, stakeholders and the broader community expect and demand the group to demonstrate its support for Paris rather than merely stating it.

I urge shareholders to vote for Resolution 5b and no matter the outcome, I implore Macquarie to change course, revise its strategy and commit to providing no further financial to support for major fossil fuel expansion. Thank you, Chair.

Thank you. I'll now open the polls on all the resolutions put before the meeting today. They will remain open until just before we close the meeting. We're going to adjourn at this point for a refreshment break, and we'll reconvene in about half an hour. If you've already voted with the handset and you don't wish to return after the break, could you please hand the handset in at the registration desk. For people in the room, shareholders or proxy holders, if you'd like to ask a question. When we come back, it'll be handy if you could sit near one of the microphones. For those online, there will be a notification on screen when we're about to resume. Thank you. See you in about half an hour.

[Break]

Welcome back, everyone. I'll now reconvene the meeting. We still have a quorum. So let's continue with the formal business. Please be reminded that the polls remain open, and we're going to take questions and comments now. Just as a reminder, we are committed to ensuring that people attending the meeting feel safe and respected at all times. And that means we have to conduct the meeting in an orderly fashion, and we can't tolerate disruption. Thank you for your cooperation on that.

We're going to start with questions that are submitted in advance, of which there are a number and then work through written questions submitted online, questions from members in the room and audio questions. As usual, you're welcome to ask 2 questions at a time. After that, we'll give other people a chance to ask their questions, and then we'll come back if you have more than 2 questions.

We need to address a wider range of issues as possible. So I may group some questions or defer consideration of a question until later if that makes sense for the running of the meeting. Now if you have an individual customer issue or another matter that isn't related to the business of the meeting today, there are people, there are staff at the back at the shareholder table, they'd be happy to help. We're not really able to resolve customer problems at this forum.

I note that Voula Papageorgiou from PricewaterhouseCoopers, our external auditor, is here today. She is available, if needed, to take questions on the conduct of the audit, the preparation and content of the auditor's report, the accounting policies adopted by the company in relation to preparing the financial statements and the independence of the auditor in relation to the conduct of the audit. The external auditor did not receive any written questions in advance prior to the meeting. So we'll now take questions that were submitted in advance. Can I have the first one, please?

Chair, our first question comes from [indiscernible] Proprietary Limited. Their question is, why has the shares remained the same for 2 years?

Look, we don't encourage the management team to try to run the company with a view to short-term share price performance. There are many things that affect share prices, many of which are not under our control. So the focus of the management team is on the things they can control. And I think we can say that they've delivered great value for shareholders over the long run. As it happens, I think the share price today is noticeably higher than a year ago. But as I say, we don't try to run the company on the basis of short-term performance and we're well positioned, I think, for the future as Greg and Shemara was saying earlier. Can I have the next question, please?

Chair, our next question comes from Mr. [ David Yule and Mrs. Elizabeth Jane Yule ]. The question is, does the Board still see there is no conflict of interest in Director, Michelle Hinchliffe, an ex KPMG partner being involved in the meetings to appoint new external auditors?

Well, I covered the KPMG matters earlier on. And I think the key point is it's not a matter of not having ever any conflicts. It's a matter of knowing what the conflicts may be, disclosing and then managing appropriately. And we feel that we got the right balance between being able to draw on Michelle's skills and managing the conflicts. And as I said before, she took no part in the scoring or the decision on which firm we ultimately chose. Can I have the next question, please?

Chair, our next question is from Mr. David Yule and Mrs. Elizabeth Jane Yule. The question is, in the light of the recent and ongoing disclosures about the business practices of KPMG, including hounding of a whistleblower, resignations of senior staff and the upcoming Senate inquiry, does the Chairman still stand by his reported comments of silly talk in regard to Michelle Hinchliffe's links to KPMG?

I've got nothing to add about KPMG beyond what I outlined earlier for shareholders. And I think the question of Michelle's appropriate role that was covered in the previous answer. The next question, please.

Chair, our next question is from [ Mr. Evan Nicholas and Mrs. Barbara Nicholas ]. The question is, Shareholders who have elected to receive communications by paper should automatically receive a paper Notice of Meeting and voting form as a matter of course. They should not have to trouble someone to use their computer to do an online vote. This sort of action is typical at Macquarie, who really don't care for retail investors.

Well, Mr. and Mrs. Nicholas, I'm sorry that you had an unsatisfactory experience there. I understand the share registry has reached out to you to review the instructions. There are representatives of the registry here today should you need any further help, and we'll try to make sure that works better next time. Can I have the next question, please?

Chair, Our next question comes from [ Ms. Ann Murray Bevis and Mr. Sean Brooklyn Salisbury ]. Their question relates to credit reporting leverage. The question is, is the Board aware of documented evidence indicating that Macquarie linked the correction of adverse credit reporting to the withdrawal of credit related and unrelated complaints? Does the Board consider this an acceptable regulatory and reputational risk for shareholders?

Look, I think this is a particular customer matter, and I don't think this is the right forum in which to address it, where a problem arises, we will seek to address that and fix it. But I can't -- I don't think I should seek to address particular customer concerns in this forum today. Next question, please?

Chair, our next question comes from Ms. Ann Murray Bevis and Mr. Sean Brooklyn Salisbury. Their question relates to external dispute resolution integrity and enforcement. Their question is, do Macquarie Group's governance and risk frameworks permitted business, while an Australian Financial Complaints Authority determination is pending to make an unagreed nonconsensual payment into a disputed loan and simultaneously directly ask the authority without informing the customer to expedite its decision and permit collections including possible enforcement after closures.

Concerns regarding possible inducement were raised at the 2025 AGM. Macquarie Group's Integrity Office after consulting external independent counsel concluded that the conduct did not amount to bribery or inducement and was ethical. Macquarie subsequently and shortly after issued a default notice while related matters remained with the independent external ombudsman and admitted it was an error only after it was challenged. Does the Board endorse that conclusion and what controls protect shareholders from recurrence?

We do endorse the integrity offices work. We stand by those, and we're confident in that process. Beyond that, this is a particular customer matter, which I understand has been addressed, and I'm not proposing to do any more on that in this forum today. This is not a forum for customer issues. Again, there are people here who can give any further assistance, if needed. Can I have the next question, please?

Chair, our next question is from Mr. [ Tian Yu ]. A question relates to the commodity business. The question is, I have often heard remarks that Macquarie makes a lot of money when commodity prices are volatile. Would you be able to share with us if Macquarie derives its profits via transaction fees taking calculated positions and/or any other trading strategies or factors.

Macquarie is active in the commodity space. But I think this question, perhaps I can refer to Shem and/or Frank?

Of course, I'm happy to answer that and Frank can join -- add anything if you like. But we actually do generate revenue from all of those things. The main thing we do is serve customers in our commodity and financial markets business. So we, in commodities, connect consumers and producers with transportation offerings, risk management, hedging, financing and we principally get paid fees for that for the services that we offer, the financing we offer, et cetera, because of the insights our people have and our access to storage and transportation infrastructure, et cetera, we might have the ability to take some positions around that.

But generally, our inventory management and trading income, as we call it, is a smaller portion of our income than the service-based annuity income that we generate each year by growing the franchise. I don't know Frank, if you want to add?

Nothing to add. It's really client business where we're managing their risks. So we provide them risk management services by providing them things such as derivatives. And so that's really what we do, which is very much a client-led business.

Thank you, Frank. Can I have the next question, please.

Chair, our next question is from Mr. Tian Yu. The question relates to share price split. The question is, congratulations to Macquarie for its share price getting heavier and heavier, especially in our local ASX context. So is there any merit to split Macquarie Group stock in some meaningful way? As a small retail investor, it feels psychologically better to own 5,000 Macquarie shares versus 1,000, i.e. a split of 5, although value-wise, it is neutral. In addition, it will help to increase trading activity in the derivative market where 1 contract is fixed at 100 shares currently regardless of the market price of the underlying security.

I think on this one, share splits and so on, I'll pass to Frank.

Thank you, Chair. Well, thank you for that suggestion. I get any feedback from shareholders will take that under consideration. As you said, this is a question driven by the fact that the share price is increasing, which is probably a good thing, but we know that feedback, and we'll take it under consideration.

Thank you. Next question, please.

Chair, our next question comes from Mr. Craig Caulfield. The question is, Mr. Ward, shareholders and the wider market are interested to hear directly from you regarding our future direction. Your audit chair met with KPMG pitch partner, Rachel Gatt and Charles Hatchman before the tender opened, brought Mr. Hatchman in to teach Macquarie how to run the tender than attended EY's early bid meetings before the committee blocked EY from applying. Eileen Hoggett, also on Macquarie's pitch team has since been sanctioned over the Westpac pitch and the federal government has now barred KPMG from bidding for new Commonwealth work all together, while it's investigated. Mr. Ward, as incoming CEO, will you personally pause the KPMG transition pending that outcome or proceed regardless?

Well, I'm going to respond to that by saying, as I said earlier, we have some inquiries with KPMG on the integrity of the way in which they pursued the Macquarie tender. And in regard to Michelle's attendance at meetings, as I said earlier, she attended in the pre-tender period meetings with likely tendering firms on an equal basis across firms. So there were no particular special favors to KPMG. I think that was a proper process. The Board stands behind that. Going forward, we have sought some information from KPMG. We don't have all of that yet. We probably will have that before too long, but I don't have it today. When we have that, we'll consider what, if anything, further needs to be done. Next question, please?

Chair, our next question comes from Mr. Craig Corfield. The question is Macquarie snubbed Senator O'Neill's parliamentary inquiry invite in June with the CEO's office replying through a junior com staffer than an HR executive. Dexus facing the same allegations had its Board summon KPMG's Chairman directly to explain himself. Mr. Wood, as incoming CEO, will you commit personally to appearing before the committee, if requested, rather than snubbing it again?

Well, let's establish on facts here. Macquarie didn't snub the committee. The committee made a request for any information that Macquarie might have about how the matters into which they are inquiring. I think initially that request came via e-mail to a media inbox, which probably complicated the process of responding. But Macquarie didn't snub the committee, what Macquarie did was to go back and say we didn't have any information that we could offer on the matter at hand. Can I have the next question, please.

Chair, our next question is from [ Mr. Chi Lee ]. The question is, considering the downturn for the residential property market, it may present a good opportunity to grab market shares from the Big 4. Will Macquarie provide further incentives to owner-occupier loans or incentives for existing shareholders. For example, AMP has offered a slightly better rate and no fee offset account for their AMP first home loan to existing shareholders?

Well, on a business operational matter, perhaps I should -- that is one perhaps, Greg, I might refer to you or and/or Ben whichever you prefer. Thanks.

Thanks very much shareholder for the question. We've got some very compelling home loan product offerings. And of course, all of our home loans already come with fee-free offset accounts and all our deposit accounts have no fees or hoops or catches. So we think we have got a very compelling offer. And likewise, with our home loan rates, they're very, very competitive, and we're growing market share. So we don't have any special plans to change the offer at this point.

Thank you, Greg. Next question please.

Chair, we will now take questions from the floor. John Church, please stand to ask your question.

Thank you, Chair. I'm an oceanographer and a climate scientist. Fellow of the Australian Academy of Sciences, fellow of the Australian Academy of Technological Sciences and Engineering, and I've been awarded numerous high-level international prizes improving the world's understanding of climate change and the risks it poses. I've been a convening lead author of 2 IPCC reports. In the 2026 annual report, Macquarie Group claims to be committed to the goals of the Paris Accord. That is committed to playing its part in and I quote, "holding the increase in global average temperature to well below 2 degrees Celsius, above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 degrees or so above preindustrial levels."

The scientific consensus is clear. The world already has enough existing fossil fuel resources to breach the Paris goals. Achieving the Paris goals requires rapid and an immediate mitigation of the world's greenhouse gas emissions and no new addition of greenhouse gas resources. In direct conflict with this with its commitment, Macquarie is making critical financing and advisory decisions today to enable major new fossil fuel projects, projects that will enter the market in the 2030s and operate for decades into the future and well past 2050, when net zero needs to be attained.

These projects will have long-term climate ramifications, increased world emissions and the likelihood of exceeding 2.5 to 3 degrees warming scenario by 2100. What your annual report refers to as a Hot House World. And I quote, "a world in which critical temperature thresholds are exceeded, leading to physical risks and irreversible impacts." The International Court of Justice has recently ruled that countries have a legally binding obligation to prevent significant harm to the climate from greenhouse gas emissions.

Macquarie is creating risks to its investors, clients and other stakeholders as well as the broader national and international community, through supporting an increase in greenhouse gas emissions. Macquarie has acknowledged that a Hot House World would involve severe physical risks and irreversible impacts. So my first question is, does the Board accept the overwhelming evidence that Macquarie's decisions today to support new fossil fuel projects increases the likelihood of a Hot House World. And how can the group claim to be supporting the goals of the Paris Agreement given that its actions are just the opposite of what is required? And after you response, I have a second question.

Thank you for your question. We're not in a position to debate the science. We accept the science as it is. In regard to Macquarie's own activities, our understanding is that actually there will need to be investment in various fossil fuels, especially gas for quite some time ahead. And as I understand it, that is envisaged in many of the scenarios that get talked about. As far as our own activities are concerned, the things that we're doing are consistent with earlier numerical targets that we had set out in previous years.

We're continuing to test the outcomes against those targets and report on that in the annual report and our appetite to continue supporting renewable energy of various forms are consistent with our client demand, and it's ultimately a matter of how much client demand there is for that continues as it was. And as I said earlier, under the Macquarie Asset Management platform, those green assets have gone up about sixfold in the past 5 years ago. So that is our position and what we're setting out to achieve. And as I say, our understanding of the world is that there will need to be some investment in fossil fuel types, especially gas for some time ahead yet, and our actions are consistent with that. Your second question?

Yes. Given your inadequate response to those questions. Will the Board commit to bringing a full and open climate change risk assessment to the next annual meeting, one that is not driven by internal inconsistencies, does not contain greenwashing, keep the market fully informed and is actually based on the best international science?

What we'll be doing for the next annual report is the sustainability reporting as per the standards as we have this year. Next year, we'll be seeing the MAM side of things brought more fully into the corporate reporting as the standards will require. There is no greenwashing. And what we said in the annual report, we actually have a greenwashing standard that rigorously test every statement we make and all the numbers we quote, the assumptions and estimations that we've made, it's all very transparent. And that's what we'll be doing for the next annual report. Thank you. Next question, please.

Our next question comes from Mr. Michael Sanderson.

Another year. Just got a quick comment before I ask questions. I was driving down from Hunter Valley and I heard on the radio that OpenAI was doing development work with their latest model. And it broke out of the sandbox, all on its own, no prompting, Anthropic's Claude Mythos had a similar issue recently also, I wish you well with AI. I assume it's 2 questions sit down and join the queue.

That's the rule, yes.

First question is treasury is consulting on harmful lead generation linked to superannuation. Has Macquarie gained any indirect benefit from lead generation involving superfunds, products, investments or members of money? If so, what benefits did Macquarie receive, what risk did this create? And how did Macquarie manage conflicts of interest, legal risks and damage to its reputation?

Perhaps I could get Shem or one of the management team to respond to the particular questions there.

Could you just repeat what you said in terms of treasury, sorry.

Lead generation.

Treasury is currently consulting Treasury put out consultation papers on different topics from time to time. One of the concentration papers -- constant consultation papers related to harmful lead generations. I think the financial Royal Commission called them introducers.

Yes. I was just going to say maybe Greg should talk about that because it impacts mostly the wealth area that Greg leads.

Yes. Thanks for the question. We're aware of the proposals around lead generators. Obviously, we had a little bit of experience of that in the Shield matter where some of that came about through lead generation, which we weren't aware of or involved in. We don't use lead generation of any form in our device business or in our private banking business. And we seek in cooperation with ASIC to identify financial advice businesses that are using lead generators, perhaps in an inappropriate way and we seek not to serve those businesses. So we're very supportive of the work that Treasury is doing.

Thanks, Greg. Your second questions?

Macquarie worked with the Australian government in 2025 and 2026. United States -- in the United States with regard to superannuation summits. The Summit is connected Australian super funds with foreign governments, investors and investment opportunities. Was this government backed lead generation on steroids? What business did Macquarie gain or expect to gain from these introductions? How did Macquarie manage any conflicts of interest? In my opinion that Mr. Trump is probably the biggest grifter on the planet right now?

Well, Shemara is actually present at some of the meetings, so I think I'll suggest that she respond.

Yes. And I think those summits were very different to lead generators, which are situations where people are trying to encourage less sophisticated retail investors to go into products and pay the commission for getting them in there. These were very sophisticated institutional investors that represent the multitrillion dollar pension funds in Australia going to the U.S. to understand the investment opportunities in those markets and make calls themselves. So we were not being paid any commissions to put them into products or anything like that.

We were asked to help host this because we're very, very active in the U.S. and have been there for over 30 years in areas like infrastructure, commodities, et cetera. So we were one of the Australian companies that helped facilitate that. There were others in areas like tech, et cetera. I think they were a great initiative, letting the savings pool here is now growing to multiples of the GDP of Australia and is needing to invest globally and doing that in a very responsible paced managed way. And so it was a great opportunity to give those sophisticated investors insight into these markets where they're going in with a very patient, disciplined approach.

There's not those opportunities in this country?

There certainly are. But as I said, the pension pool has now grown to 2x the GDP of this country. So they are heavily invested in this country, but they have now a bigger savings pool than they can invest here. So they're in a very disciplined way, balancing other markets, just like all the huge pension funds globally come and invest here as well to diversify. It's just a responsible way of diversifying risk and return for the pensioners who ultimately they have great responsibility to delivering return on savings for.

I think we might move to the next question, please.

Chair, our next question comes from [ Mr. Philip Led ].

Global circumstances, including oil security and the need to reduce emissions almost dictate that Australia should be reducing its use of diesel. At present, we're using more diesel than ever. Just look at the increase in use in the last 6, 7 years. So my question is, has Macquarie increased its investments and measures that could see Australia reduce its dependence on diesel or second question is, would Macquarie be prepared to invest more in this area.

Look, our general position, as you know, is to be prepared to catalyze other people's capital and our own in pursuit of renewable energy where that makes commercial sense. And as I've set out some numbers on that earlier. On diesel, in particular, I don't actually know whether we have anything that specifically relates to that. I don't know whether anyone up here knows the answer to that in terms of potential future investments, Macquarie is always up for looking at things which commercially stack up. They have to commercially stack up before we would put your money into them. But on diesel, in particular, I'm not sure I can answer that.

We have no material exposure to diesel.

Okay. I think that's the answer, no material exposure. Did you have another question, sir?

The acquisition of Qube, could you comment on that? Because they are into land freight, including rail freight, you -- rail freight uses 1/3 the diesel that road freight users. So a bit about Qube, please, and what you might do with Qube.

Okay. Well, Ben Way, who is in charge of Macquarie Asset Management. Ben, I'll hand to you on that. Thank you.

Thank you for your question. It's true that sometime in August, we will become the owner of Qube along with other shareholders. It is also right to say that in most of those sorts of businesses that we own around the world, there will be a mixture, if you like, of fuel types used in the various vehicles that will be part of those businesses. Often a large part of our investment thesis is actually how we electrify and modernize those fleets. So while there may be some portion of any of our portfolio companies around the world when we initially invested in them that have perhaps traditional fuels.

Generally, our investment case will be to modernize that and to electrify it because that's both often much cheaper, but also allows us to drive net zero transition plans through those portfolio companies. And as you probably have heard from the Board and Glenn today, a large part of what MAM does, where we have portfolio companies that we have -- we either control or have significant influence is to really move them to being net zero by 2040. And so that will have a similar program when we invest and become the owners of Qube here in Australia. Specifically, I do not know the fuel mix, I will say. And so we would have to come back to you and answer that question with more specificity after the meeting. But thank you for the question.

Thank you, Ben. Our next question, please?

Chair, our next question is from Mr. Ian Dunlop.

Thank you, Chair, for the opportunity to ask questions. I have a background in fossil fuels, initially in oil exploration with the Royal Dutch Shell group around the world, subsequently in coal developments here in Australia. I chaired the -- I was CEO of the Australian Company Directors in the late '90s. And I chaired the Australian Coal Association in the late 1980s. I've been working on Climate Solutions for some 40 years.

Currently, I'm an executive of the Australian Security Leaders Climate Group, which is a group of former military intelligence and security experts who were concerned about the security implications of the existential risk that climate change actually represents. I congratulate the company on the action it's taken on developing its renewable energy portfolios and are obviously continuing to do. But renewables thus far are only meeting the increase in energy demand. We are not doing anything yet to reduce the legacy of fossil fuels and particularly the emissions from those fuels, which are at record levels and rising when they should have been dropping over the last 20 or 30 years if we are to have a safe climate.

The actions I hear Macquarie taken seem to be disregarding the implications of what that really means. Your response to, I think, Resolution 5b in the Notice of Meeting places great emphasis on maintaining energy security and really fossil fuel expansion given the fact that renewables have not been growing as fast as they should be. And essentially, you seem to justify on a base of these IEA's current policies and stated policy scenarios, which essentially are providing for the depletion of existing oil and gas reservoirs and also to meet sort of increasing extra demand, despite the fact that we're actually heading into an LNG glut at the moment and that the fossil energy return on investment is dropping because it's becoming more and more expensive to actually produce those fuels.

I also note that you've abandoned the essential target of an absolute reduction on emissions in favor of reducing emissions intensity, which allows you, of course, to increase production and emissions whilst meeting the intensity reduction targets. Yet in all of this, what I don't see is any reference to the human security dimensions of what is happening with climate change by prioritizing fossil energy.

It's the damage to all the other staples of civilization and human survival such as water, food, livable environment, health, social cohesion, which are really now under threat from climate change in many parts of the world, not to forget the supply chain problems, of course, that are obvious coming out of the current U.S.-Iran war. Those IEA scenarios are not predictions of fossil field demand that basically what happens if you keep doing things in the way we've been doing it. And they lead to the potential temperature increases that have been mentioned at 2.5, 3 degrees C, which are not -- they're not livable world.

These will be catastrophic, absolutely catastrophic. Even at 2 degrees C, we're going to see, I think, widespread mortality, food and water shortages and conflict, let alone economic devastation. So my first question, Chairman, is, I know this is a wicked problem, but really what is the Board's justification of prioritizing energy security and fossil fuel expansion in this way, whilst at the same time, ignoring the human security dimensions of it?

I think the basis of Macquarie's approach is our understanding that there will need to be some fossil fuel investment for quite possibly some time yet. You mentioned energy security. I think the world has changed quite materially in the past couple of years and the security and availability as well as the price and who you get it from has become something much more to the fore. There may be a gas clot at some point in the future, I'm not going to try to predict that right at the minute from what we see, there's the shortages around. There's talk of gas reservation in our own country, for example. So what we're trying to do, I think, is we're commercially viable and sensible meet needs that seem to be emerging. We continue to, as I said earlier, to support the energy transition mainly by the green energy investments. You mentioned abandoning targets. Actually, the targets that we set several years ago are the same targets now. It's true that there are emission targets in -- for both mortgages and upstream oil and gas, but we haven't changed those.

They're still in place. Quite possibly, you disagree with the targets we set, but they are the ones we set, and we continue to track our behavior, our outcomes against them. It is a wicked problem. We're seeking to play a role. We can't determine global policy. We are unable to do things, really which address these problems for the world, but we're seeking to play our part in a way that we think makes sense, is tractable, practical and is in the interest of shareholders. That's as good as I can give you, I think, on that. Do you want to add anything?

No. Nothing else.

Did you have another question?

Yes. I would, Chair, if I may. Thank you for those comments. If you look at the sustainability report, it indicates that assessing anticipated climate-related risks and opportunities, there are going to be no material financial impacts in the short to medium term on Macquarie. In other words, for up to 5 years from execution of the current strategy. You indicate also that as the time horizon extends over the medium to long term, the range of outcomes becomes increasingly broad. Consequently, the uncertainty involved in estimating financial effects as such that you've chosen not to disclose any financial information.

On that basis, the strategy, as I understand it, which includes increasing finance for long-term oil and gas projects is supposedly robust against climate impact. Chair, I would suggest this is a extremely dangerous way in which to treat uncertainty. You'll be well aware at the moment that the 1.5 global average surface temperature increase, which is the lower bound of the Paris Agreement is to all intents and purposes here, we've exceeded it, more than a decade earlier than we expected.

Climate change impacts recently in Europe, the U.S. and China are extraordinary by any historical standards. The predicted Super El Nino, which is currently developing in the Pacific, promises way beyond any previous experience. It is really quite scary stuff if you've been looking at what it means. This week's addition of the Economist magazine, which you may have read sets out why this is happening. The key point in the whole thing is that while the basic science has settled, the uncertainties remain about the implications of that science, and they're all pointing in the wrong direction.

That basically means the climate impact is probably going to be far worse and far sooner than the scientist thought. I'm certain the way in which governments and corporates are currently planning for. So in these circumstances, I suggest that you can't ignore uncertainty, awaiting quantification as you're doing. They are almost certainly going to a material financial impact on Macquarie's operations even within 5 years, let alone the longer term. And this comes through second and third order effects. So I suggest it requires a fundamental recasting of the way you actually think about risk and uncertainty, incorporating the precautionary principle of taking an emergency action now in anticipation of worst-case scenarios.

This includes dramatically reducing absolute emissions and operations in which you're involved. There must be some limited use of fossil fuels. I accept that. But that does not require expansion from the opening up, for example, of new gas basins like Beetaloo. We have enough already. We just can't afford it. There must be far more focused on reducing fossil fuel demand, which I know you're hardly involved in doing. So in these circumstances, my second question, Chairman, is to secure Macquarie's future, will you please consider reframing your current treatment of risk and uncertainty to focus on emergency action to reduce emissions using the core capabilities that you have at your disposal for both fossil fuel supply and demand?

Well, thank you for the suggestion. I'll just say on the material that's in the sustainability report. As you say, it was difficult to find material effects on the business over a short to medium horizon. It is highly uncertain in the longer term. I would note that, that uncertainty could cut the other way, not just the way that you set out. But some of this, no doubt, is a result of limitations in our ability to model these things, and that's an area of our work that we hope to improve in the future. But thank you for the suggestion. Next question, please.

Chair, our next question is from Mr. Kyle Robertson.

Okay, I'll keep it brief. I just want to ask a pointed question about the group's current position on climate change, which is that it claims commitment to the Paris Agreement, claims to accept that the climate science on climate change is clear and unequivocal. I'm getting to a question. I'd like the Chair to enforce the disorderly conduct thing that was raised at the start of the meeting.

Go ahead, Kyle, on the question.

So Macquarie claims commitment to the Paris Agreement, claims to accept the science on climate change is clear and unequivocal while simultaneously supporting new fossil fuel projects. It justifies this behavior in its Notice of Meeting by saying that, under scenarios that are aligned with catastrophic warming, such new projects are required, it disregards the severity of the physical climate risk from these projects and then openly acknowledges that the group's assessment of physical climate risk has led to no anticipated changes in strategy or decision-making, implying the behavior will continue. Does the Board acknowledge there's a contradiction here?

No, I don't. We -- I think we've set out our case quite clearly. I've answered this in some of the previous answers as well. And I don't think there's a contradiction at all. We're trying to navigate a balanced approach to all these things. And I think Macquarie has a pretty good track record actually on supporting the energy transition. And all the things that we're doing in the oil and gas space do get tested against the targets we've already set out in earlier years that remain in place. Do you have another question?

Well, it would be further to that, which is that the Notice of Meeting said that the new gas projects are needed in scenarios where they were warned by 2.5 to 3 degrees of warming. So is that Macquarie's justification for supporting the new gas projects it does? Because if that is the case, that would seem to be an apparent contradiction with its commitment to the Paris Agreement.

Well, I don't think there's any value to be added by getting into debates about particular scenarios. We're comfortable with the risk appetite that we've taken on in that particular project, which is actually quite a very small part of Macquarie's overall balance sheet. Next question, please?

Chair, next question comes from Morgan Pickett.

Having scrapped your commitment to aligning finance with net zero by 2050, is the group committed to aligning finance with the temperature goals of the Paris agreement?

We've made the commitments we've made in the documents, nothing further to add. Next.

So you're not aligning finance with Paris. Is that correct?

We've said we are committed to the Paris goals. We support those goals. That's what we've said.

Yes. That's about as much substance as I found in the report as well. Okay. regarding Beetaloo, you claim to be supporting your oil and gas clients to decarbonize. How are you supporting these clients to decarbonize their operations?

I don't think it's sensible to get into particular client situations. We do have an active process of trying to help clients decarbonize where that's their intention that extends a long way beyond just oil and gas to other sectors of the economy. But I don't think it's right to try to talk about particular client instances.

I understand that, Chair, but in your Notice of Meeting and the response to Resolution 5b, you specifically speak to Beetaloo as a project that you believe will be required for energy security. You specifically state that you're working with these clients to decarbonize their operations. So it's a simple question. It should be a very simple to answer. How are you working with them to decarbonize?

I can't give you the fine detail on that particular case. I don't have that information. I'm not sure whether anyone up here does.

Will you take it on record to address that?

We'll take it on notice, thank you. Can I have the next question, please.

Chair, our next question comes from Amanda Richmond.

First, congratulations to Shemara on her tenure CEO and Greg Ward on his new appointment. So I'm Amanda Richman from Australian Ethical Investment, we're an institutional shareholder in Macquarie and we co-filed the shareholder resolution. I think Macquarie has heard feedback from shareholders on its climate commitments and implementation, which I hope Macquarie will consider, and we're keen to continue to engage on this.

Just a couple of points of clarity based on questions that we've heard today. Chair, Macquarie's Notice of Meeting, as many have mentioned, refers to IEA's current policies and stated policy scenario. I suspect there might be some perhaps a misunderstanding about what Macquarie intended to communicate by referencing those. So as I understand it, those scenarios describe outcomes, which would result in warming well below -- well beyond the goals of the Paris Agreement and the IEA presents them a scenarios to be avoided. Could you clarify why Macquarie chose to reference those scenarios and confirm whether Macquarie also views them as outcomes to be avoided?

I think we use those scenarios is just a way of framing discussion. At the moment, the world is not on track as far as we can see with the net zero by 2050 scenarios that the IEA has set out, and I'm not an expert in these scenarios, but that's my understanding, that scenario has seen consistent upward revisions to its near-term emissions trajectory because as has been earlier outline, emissions actually have not fallen other than in COVID. So we reviewed the current policies and stated policy scenarios, which is a useful framing for where the world may be hitting. I don't think we're endorsing those as any particular desirable, we're not expressing that view. They were just things that we use for framing the discussion. I think we would say that if the science is 2.5 to 3 degrees warming to be damaging, then we would accept that.

And just one other clarifying question. I think Ian Dunlop's question related to how Macquarie is thinking about the impacts of physical risk on Macquarie's own business and understand the difficulty of looking ahead when there's a lot of uncertainty beyond a 5-year period. I understood Macquarie's approach to risk management is to understand worst-case scenarios. Has that principle been applied to how Macquarie considers physical climate risk?

That is the approach that we take to all risks and to the extent we can quantify them, we do look through those worst case possible outcomes in all those things. In this particular case, of course, it's not possible to do that quantification to the same extent for the very reason that potentially some of these things don't have precedent in the data. So we seek to adopt that practice wherever that's possible. This is inherently difficult to model out beyond, I guess, the medium term. We will keep working on that, but that is as good as we could do on this occasion. Next question, please.

Chair, our next question is from the Australian Shareholders' Association.

Peter Gregory is my name, and I'm here today representing the Australian Shareholders Association, which is a not for profit body that represents the interest of small and individual shareholders. I have proxies from shareholders today totaling 367,000 shares. And I also note that Macquarie has 205,000 shareholders on its registry that own less than 1,000 shares. This is 90% of the shareholders on Macquarie's register and as well as ASA members, we do work to represent and be the voice of all small and individual shareholders.

I'd like firstly to comment on the remuneration report. In spite of the improved financial results delivered by Macquarie's leadership this year, ASA has reservations about the remuneration plan and for the following 3 reasons: ASA is voting open proxies against the remuneration report. See, ASA is of the view that the CEO and leadership team need to be rewarded to attract and retain and motivate the best people. We also believe that the overall quantum needs to be reasonably -- reasonable and supported by appropriate benchmarking of peers. We have completed a detailed analysis of data, benchmarking data that largely being provided to us by Macquarie and have concluded that the quantum of remuneration is at a higher level than it needs to be to meet our shared objectives.

Secondly, in terms of the mix of the remuneration components, we see that the long-term incentive plan is based on earnings per share and return on equity and that growth of these metrics, as stated in the annual report drives long-term shareholder value. Yet this measure is only 12% of the CEO package. We ask that to give a better alignment of leadership and shareholders that the proportion of long-term incentive be increased. We also note that the earnings per share growth, as I read the data in the annual report, has not met its hurdle for 50% of the time since it was introduced in 2009.

And thirdly, to the profit share which is 84% of the CEO maximum package. While we welcome the greater amount of disclosure this year, we don't see transparency about how the size of the maximum award has arrived at, nor do we see clear performance hurdles or how specific outcomes are linked to defined rewards. That is, in our view, an over reliance on board discretion. In short, ASA believes that shareholders should be able to understand how remuneration outcomes have been determined and how they reflect performance over time and we don't have this understanding with Macquarie's profit share.

I know there's a lot of material that I presented to you in that, Glenn, and I'm not expecting a full resolution to our points of view here, but I would appreciate your overall comment and also would like to add that ASA is willing to work with Macquarie to achieve what we think is a better alignment of the interest of Macquarie leadership and shareholders.

Well, thanks, Peter, for your comments and welcome suggestions. We've done a lot of work on the rem framework and disclosure, as you said, over the past year. I respect your responsibility to vote your proxies as you see fit, absolutely. We do think the remuneration system, which is very long standing, has worked well. We're always open to continued evolution and continued evolution is something that's ongoing. So thanks for the suggestion. I would only add that in the discussions we've had with shareholders thus far in recent weeks as we lead up to the AGM, I think the rem outcomes have been, I think, have been well received, what we've tried to do.

And I would say my assessment and Jillian, if you'd like to add, feel free. I think the framework overall is very, very strongly supported by the vast bulk of shareholders, but thank you again for the engagement we had with you and for your observations.

To reinforce that comment that we found there was broad support for the framework even when there was more information requested on the consequences of regulatory matters that arose and we certainly -- and that we -- could we have more disclosure on the process of making those judgments on consequences. So we addressed all those things. But overall, I think the framework has been supported because it is a profit share arrangement. So it is very much aligning the shareholders with the focus of the executives. And that's what other shareholders have indicated they support. But if you say it's just too high, that's sometimes because our profit is outperforming other financial institutions.

Thanks, Jill. Peter, did you have another question?

Yes, I do. And I just -- if I can say thank you for taking consideration to our point of view. On the regulatory question, there's been a resolution of the issues of short-selling reporting to ASIC and Shield's Financial Master Funds inclusion on the Macquarie Wrap program. This has come at of cost and more importantly, has brought reputational risk to our company. With the regulatory issues, specific known causes I understand are being dealt with, as you've referred to earlier, but I don't think we've heard much disclosure about what you referred to as underlying root causes.

Has there been a sufficient review to ensure regulatory compliance and confidence that there will be no more surprises in this regard. And then with the Macquarie Wrap Platform, we note that there's been a greater degree of screening of included products, and we would ask, has this action being sufficient to mitigate this risk, both financial and reputational consequences of possible future occurrences?

Thanks for the question. On the short-selling matter, there's a large program of work underway to rectify those issues that's making good progress. And importantly, to pick up a point you made, there is a thorough root cause analysis that's part of that. And we've identified a few common themes going back through history, which I won't go through, but we've done that work, and we believe there's good progress underway to rectify those things. On the Shield matter, I would say that we have felt that the way Macquarie responded to that matter has actually been reputation enhancing for the company. We believe it's been brand positive. I acknowledge that there was a cost to shareholders for doing that, but that has been brand positive, and I think has also improved our standing with regulators. On the specific things we've done, Greg, perhaps would you be able to comment on the way we've been revising access to the Wrap platform and so on.

Thank you, Chairman. Yes, I think we thought we've responded well to the Shield matter. And obviously, there were a lot of parties involved in that in the industry that are being investigated by ASIC and their work continues, and we're very supportive of that work. We made extensive enhancements to our compliance and governance arrangements, including to the fund menu to provide additional protections on -- for investors that are investing in funds on the Macquarie menu, and we're really satisfied with the work that we've done there.

Thanks, Greg. Can I have the next question, please?

Chair, our next question is from Mr. Enzo Prater.

I have 2 questions today. My first question is actually a request to Macquarie Bank, and it is, can you please publish on your website the interest rates on offer for business term deposits, as you already do for personal term deposits. The reason for my question is this, I am treasurer in 4 strata schemes. All of them, all the 4, invest the surplus cash in Macquarie Bank term deposits, business term deposits because strata scheme is a business. Every time one of those term deposits matures in order to decide what to do next to roll over, for how long or not, I needed to call the strata manager who in turn calls Macquarie Bank, gets the rates for me and communicates them to me. This process add additional costs of the owners that I present. So I was wondering whether it will be possible to publish the interest rates and offer on the website so that I do not need go through this long detour to decide what I have to do.

Okay. I'm going to look at the front row as to whether there's anything we can say about publishing rates on the website, Greg or Ben?

Thanks very much for the question, and thanks for your support of the Macquarie product offering. A term deposits at Macquarie and in the market are quite a historic sort of operating product. And you may have seen media in the last couple of weeks that we've launched a new term deposit offering, which we think is a dramatically different and better offering than is available in market more broadly. And as part of that, you'll be able to see the rate of interest that is available on the term deposits, and you'll be able to roll over term deposits very, very quickly. And it will also show the total interest that will be earned on a term deposit as well. So I think going forward, I appreciate the feedback, and you'll be able to see this going forward.

Excellent. Just a quick question. Is it for business as well or only for personal investors?

Yes, it will be for business as well. All types of customers.

Okay. My second question is a procedural. At this AGM, we have a numeric limit for every shareholder and proxy holder to ask a maximum of 2 questions. At the next AGM, can we have a time limit as well, I would say, 90 seconds per question. The reason for that is I believe that a question that cannot be articulated in 90 seconds is probably too complicated to be addressed in the general meeting.

Thank you. Thank you for the suggestion. On that very note, we do have a lot more questions yet, so if people could keep the questions short. Can I have the next question, please.

Chair, our next question comes from [ Helen Scotts ].

Thank you for a very informative presentation. And I just want to commend you on the way that you run this meeting. It's very well done, having a break and then coming back and having the question. So those that want to leave can leave. Look, I just want to commend you, Macquarie Bank on investing in oil and gas. I don't know a country -- of a country, I might be wrong. I don't know of a country at the moment that relies totally on renewables for their energy. And while we do need to invest in renewables, I just think we're on this fast pathway to Paris 2050. And it's involving a lot of collateral damage along the way. And I think 1 in 5 families is under energy stress at the moment, and there have been reports of suicides due to financial stress.

And I personally have been a victim of financial stress due to the recession that we had to have and thankfully, due to hard work and resilience in Macquarie Bank shares, we got back on top of it. So I just want to say, I think it's really wise to be investing in fossil fuels because while we do want to invest in renewables, we really need to keep going with fossil fuels to supplement the renewables until we're ready for the changeover. And I just hope down the track somewhere, we hear about Macquarie Bank investing in nuclear energy.

Thanks for your comments. Next question, please.

Chair, our next question comes from [ Mr. Andrew Somerville ].

My first question is to Jillian Broadbent, what were the 2 major things that you did on the Board during your time? And do you have any regrets in your time on the board, anything you shouldn't have done. And my second question, if you like, is to Shemara on the same question. What 2 good things have you done? And do you have any regrets? And 1 comment, if I may, Chairman, could I suggest we have a clock in 2 minutes. And when the question starts, you start the clock. And when 2 minutes is up, the person sits down.

Thanks for the suggestion limiting the great things. Both of these people have done to 2 might be difficult, but your...

Will I go first, I'm glad to contain to 2 minutes. It's hard to say 2 things I have done or haven't done, but it has been an extremely stimulating Board to be part of. And I think Shemara's expressed this view, there are so many changes. And I've been lucky to be able to draw on a fairly diverse financial background in the commodities derivatives business and financing generally to both enjoy and contribute to Macquarie's journey, I feel.

In terms of whether I was supposed to specify things I wished I hadn't done, I don't think there are any of those. It's -- one good thing about Macquarie or there are lots of good things about Macquarie is that things evolve and change. So if you do make a bad decision, you correct it pretty quickly and you're open to input. And I think that applies both at the board and across the executives. So we're -- it's very dynamic, and I don't think if I made any mistakes. I haven't corrected them pretty quickly.

Yes. And I'd just say, in terms of what I've done here, I mean, obviously, I have no regrets or I would have gone and worked somewhere else. So I really enjoyed working here and it's been, as I said earlier, a privilege to be here. And I really can't point to things that are just me that have made this organization do so well because as I said earlier, it's very much a team effort and it's just been a privilege to work with incredibly smart but very diverse people who bring other perspectives. And between us drive everything we've done. But I don't think I can take personal credit for anything this place has done because it's always a team effort.

Thanks very much, Shem. Next question, please.

Chair, our next question is from [ Mr. Peter Star ].

Good morning, fellow shareholders and morning board, and Shemara. It'd be remiss of me not to say that on behalf of the shareholders I represent that I want to thank you personally. I've seen you often at the business summits and the banking summits and I will pass on those comments that we shared about Matt, when I see him in a few weeks. I mean I'm sure he wishes you well too.

Just 2 quick questions. In relation to the $500 million penalty capital that APRA has on us. Two of the major banks being Commonwealth Bank and NAB have had that removed. I'm just wondering if you'd like to just give us some detail about what's happening to try and get that removed because it will be for the benefit of all shareholders if that happens. And second thing in relation to what happened with the Shield fund and what's going on there with the fixing up of that and the remuneration back to the people that were affected?

Thank you. On the capital penalty, well, that's still in place. We have been making progress with the work programs that were put in place to address the various matters that led to that. As we said in the annual -- there was actually a capital and liquidity penalty that we had. We've had a partial removal of the liquidity penalty over the past year, given that APRA was, I think, satisfied with the progress we are making towards rectifying those issues. There's still some to go there yet. We are working hard to try to satisfy them with the full suite of work so that the capital penalty can, in due course, be removed.

I think most banks experienced when they've had these things in the past is that a number of years before you can satisfy the regulator in order to get it removal. So we're working -- we're continuing to work towards that. And on the Shield matter, what Macquarie did was make whole the investors that had gone into those particular products on the platform. And then we've stood in their place in the wind-up to recover the bulk of the money. That process, I think, is still ongoing and not as yet complete. We hopefully, we'll have an update for you at a future date, but that's all we have today. Next question, please?

Chair, our next question is from Mr. Stephen Mayne.

Two topics, chair succession and then audit. Firstly, are you planning to stand for reelection at next year's AGM at the end of your term?

Well, happy birthday, Stephen. I understand. We should have got a cake. My failing, sorry. We -- my term comes to an end in about a year. We are working on the chair succession matter, nothing more to tell you about that today, but I think it's all in hand.

Right? So you can't confirm that you will. So you're not ruling out retiring...

I'm never saying never, but 9 years is the normal rule. I think there's a good reason for that.

Yes, that's good to hear. Now is the next chair on the board at the moment?

I believe there are people who are already sitting here who are more than capable of doing the job.

Right. Because you've done the CEO succession. So next is chair, you're not having to go outside it's all a good process.

I think there are people on the board who are more than capable of doing the role.

Yes. Great. Now on audit, I remember being in Queensland at a conference sitting at a dinner talking to, I won't say who, but someone who was involved in the EY audit of Babcock & Brown. And they were furious that the ex-PwC partner on the Babcock board had insisted that EY had a conflict and couldn't possibly manage all of the Babcock listed funds. And then lo and behold, managed all of the Babcock listed funds. So the allegation was conflicted director steering work to old firm, citing good governance because you can't have the same auditor for the listed funds and the head stock.

And that was interesting to hear that from someone at the coalface. And then I had a look at Macquarie, and of course, PwC was auditing everything, head stock, all the funds that we been paid over $2 billion. So I was thinking that was actually bad governance. You should have had a different auditor from the head stock to the listed funds. So hence, 4 years ago, I started banging on about when are you doing a tender, when you're getting rid of PwC, it's been $2 billion, it's been too long. And the first, you just sort of fluffed it and said, the actual answer to the question was 30 years plus never had a tender, no intention to have a tender, but you just said it's been a long time.

And then each year the last 4 years, you've slowly got more and more, yes, we're having a tender. It's coming up. And then you've actually run the tender. And the thing that confused me the most is that you had to get with PwC. They've been there for 40 years. Why were they included in the last 2. Because that put Michelle in impossible position where you've only got KPMG or the incumbent. Now the good governance road was to get rid of the incumbent. So the mistake you've made is to give Deloitte and EY the punt too early in the tender process and leave the final choice between the incumbent and KPMG, which opens the door for all the conflict of interest allegations because it looks like a one-horse race because you can't give the job to PwC.

I disagree. We thought carefully about whether PwC should be included. And I should say that we think PwC has done a very good job for us over all those years and continue to do so. The main aim here is the best auditor for the firm, and it was open to us. We believe it was open to us to choose PwC again at the tender if they put the best proposal. And the way the tender was run was to seek the best offer from the firms, and that got progressively narrowed down. So I don't agree that we could not have chosen PwC. We could have, that is the view the board took. We chose to allow them to tender.

We would not have put them through that if we had no intention of choosing them. But in our view, it was open to us to choose them on the basis of if they had the best quality offer. In the end, these are all very, very capable firms. We made the choice we did, but I don't accept personally, the argument that there was no way we could choose PWC. It was open to us to make that choice. Yes, they've been through the reputational problems. But none of those problems actually were related to audit quality or integrity as you know, though, in the other side of the firm. So that's my view.

And I know that our new CEO came from PwC, I think it was 1994, but a long time ago. But are you even prepared to admit now that it was wrong to never run a competitive tender for the entire 39 years that Shemara was employed at Macquarie?

Well, look, the past -- the attitude that the boards of the past had, they had and the time I've been here, we have evolved on from there and gone to a position where we will tender every decade, at least. I think that's a better and more defensible position. The past is what it is.

And final point on audit. Australia has unique...

You're on question 4 now.

It's 2 topic limit. I think.

No, it's not. It's 2 questions.

Well, everyone else is asking 10 questions. So I'll sit down after this. Australia has a unique ability to ask questions of auditors before the meeting. Very few other countries have that. It's good to get the auditor sing for their supper. So could Voula Papageorgiou, the audit signing partner from PwC. Please comment on whether the distraction and the complexity of participating in a highly scrutinized and watched competitive tender process, compromised or challenge the actual day-to-day audit process that her and her team had to do during that tender process. So you're allowed to ask questions about the audit process. So it is -- you can't rule that out of order, I'd just say to you in advanced here, if you're about to try that. Voula can talk about the audit process. And I'm asking, did the tender interrupt with the process in any way?

Voula, I think you can comment on the integrity of the process, if you wouldn't mind. Thank you.

Thank you, Chairman. Good afternoon, shareholders, and thank you for your question, Mr. Mayne. I can confidently say that my primary focus during the audit tender process was to ensure that we continue to deliver an audit of the highest quality in integrity to Macquarie, and I was not distracted for a minute from that focus.

And I would concur that we got the usual outstanding service. Next question, please.

Chair, our next question comes from Mr. Terry Lee.

A fellow shareholder. I usually don't want to get involved with climate change, fossil fuel debate. I'm more interested in the company profitabilities and accountability. But there's so many people talk about it, so I have to have a few word for it. No one else come up and say anything.

On my judgment, Macquarie policy is grounded on fossil fuel lending is grounded in economic reality, not ideology that people are going around at the moment, the climate change people. This is not negligence, but it's a pragmatic risk management.

The result on Page 25 of your -- what's the call notice of meeting, you can check the result. Macquarie made $2.5 billion, $2.4 billion, way ahead of all other big banks in Australia. Now Macquarie diversified approach produced high return on equity, high return on earnings and a very stable dividend basically increased almost every year.

Now as a shareholder, I'm very for this kind of management. Profitability is not a failure. It's not a moral failure, but it's evidence of Macquarie responsibility in managing the profit of the company. If you check today's share price is $255.90 last time I look at it, that's the highest on record. As a shareholder, we should be very, very pleased with this result.

Mr. Lee, did you have a question?

No, I don't. [indiscernible] you a question. Maybe that we should continue what we're doing and we're going to question and shareholders should take this into consideration. Yes, that's basically all I have to say to you.

Thanks so much, Mr.Terry Next question, please.

Chair, we will now return to questions submitted online. Our next question comes from Mr. Peter. The question is, in March 2026, the New South Wales Supreme Court ordered Macquarie Securities to pay $35 million for multiple failures that caused the misreporting of millions of short sales between 2009 and 2024.

They found this was due to serious deficiencies in Macquarie Securities systems, processes and controls, many of which remained undetected for years despite a number of internal reviews. The court found Macquarie engaged in misleading or deceptive conduct, failed to have risk management systems and failed to provide accurate regulatory data to the market operator.

This has cost shareholders $35 million and kept us in the dark on aspects of the market. Why did Macquarie allow this situation to last for so many years? What steps has Macquarie taken or will it take to make sure these types of failings do not happen again? And what lessons did we learn?

Well, there were certainly problems in this area for far too long. We acknowledge that. That's a fact. That's what we acknowledged in the settlement. We believe it was in the best interest of shareholders to reach a settlement and then rectify the problems. That's what we've done.

And as I said earlier, there's extensive work underway to make sure that we don't have this problem again. I believe we have learned quite a few lessons which I won't go into the details of all the root cause analysis that's been done, but a lot of that work was very valuable, many lessons for us, and we will endeavor to do our very best to fix these problems and avoid recurrence. Next question, please.

Chair. Our next question is from Mr. Craig Caulfield. The question is, Chair, is the Board aware of Ms. Wikramanayake's intention to resign and Mr. Ward's appointment before this morning? If so, why wasn't that flagged to the market ahead of an AGM where shareholders are today electing directors and adopting a remuneration report built entirely around her leadership?

The Board took the decision to appoint Greg yesterday evening just after 5:00 p.m. and it was disclosed ahead of market open this morning. So we've met our disclosure obligations here. The remuneration report on which you're voting today is regarding the remuneration for the year that finished in 31st of March this year. So I don't think that's directly connected to the decision that we took regarding appointing Greg.

Next question, please.

Chair, the next question is from Mr. Craig Caulfield. Their question relates to Item 2, reelection of directors. Their question is, Ms. Susan Lloyd-Hurwitz, were you aware of Ms. Hinchliffe knew both KPMG pitch representatives socially from their time together at KPMG London before you voted to approve the tender outcome?

What is -- repeat that question, please?

Ms. Susan Lloyd-Hurwitz, were you aware Ms. Hinchliffe knew both KPMG pitch representatives socially from their time together at KPMG London before you voted to approve tender outcome?

Well, just before Sue responds to that, yes, Michelle knows many people in KPMG. She worked there for several decades. That is not inappropriate. And as I said earlier, her conduct in the meetings that she was willing to attend with all the tendering firms, I think, has been entirely appropriate. I don't know, Sue, whether you want to add anything.

No, I think, Glenn, the comment about Michelle knowing a number of -- a lot of people in KPMG over a long career is obvious. I'm very supportive of the process that we put in place in balancing using Michelle's extensive experience to help us through that process, which was designed and run by management and endorsed by the Board. And I thoroughly endorse the way that we balanced using her experience and having her recuse herself when scoring and their final decision was made.

Thank you, Sue. Next question, please.

Chair. Our next question comes from [ Ms. Anne-Marie Beavis ] and [ Mr. Sean Brooklynisbury ]. The question relates to artificial intelligence and complaints compensation. The question is, AI sentiment analysis, behavioral scoring and settlement propensity software can analyze complaint records, communications and meetings.

These systems can predict whether a complaint will accept a lower offer, escalate a complaint, approach a regulator or commence legal action and can recommend compensation or confidentiality terms. Can the Board confirm whether Macquarie or any service provider acting for it use these capabilities in complaint handling even where a staff member makes the final decision and whether any group policy favors meetings on Macquarie's premises or online over neutral third-party venues to facilitate recording, transcription or data analysis.

If so, does the Board consider it ethical and consistent with procedural fairness for compensation to be influenced by predictive settlement behavior rather than the fair value of the harm caused and what controls protect shareholders?

Artificial intelligence doesn't decide compensation. As I understand it, I'm assured from management that decisions on those things are made by human beings, not by an algorithm. And on recording meetings, we do not record meetings on our premises that are in-person meetings, and we certainly would never do so without permission. Things that come to the call center, I believe we're required to record those unless the client expressly asked us not to. That's the story on those things. Next question, please.

Chair. Our next question comes from Mr. Craig Caulfield. The question is, Mr. Ward, you ran banking and financial services, including the mortgage book, car loans and reverse mortgages for over a decade. AUSTRAC has now directed Macquarie and 9 other lenders to hand over home loan data in a multibillion-dollar mortgage fraud investigation. What personal responsibility do you accept for the loan file controls in place during your tenure? And how many Macquarie files have been referred?

I don't know how many files have been referred. I don't have any information on the thing to which you refer. So I don't think I can give any other comment. Next question?

Chair. Our next question is from Mr. Craig Caulfield. The question relates to Item 2, reelection of directors. The question is, Mr. William Vereker, given what's now emerged about this audit tender, will you use your position as the newest and least conflicted Audit Committee member to push for an independent review before shareholders vote on KPMG in 2027.

You are also joining the Board Risk Committee today. Has that committee been briefed on the AUSTRAC mortgage fraud data request? Can you assure shareholders its oversight will be genuinely independent of management on this matter?

William, would you care to respond?

I have nothing to add to the comments already made around the conduct of the audit tender. I obviously was not on the Board while this was underway, but everything that I have heard has been consistent with the description provided to this meeting. In relation to the Risk Committee, I should look forward to participating in that. And the committee in the meeting -- one meeting I have attended was discharged its responsibilities in an entirely independent way, and I'm very confident it will continue to do that in the subsequent meetings over the next period of time. Thank you.

Thank you. Next question please.

Chair, our next question is from [ Ms. Anne-Marie Beavis and Mr. Sean Brooklynisbury ]. A question relates to risk appetite and use of ombudsman limits. The question is, at a group-wide level, does Macquarie permit its businesses to use the independent financial Ombudsman's compensation limit as the most they will offer after admitting an error or control failure.

Documented correspondence provides an example. After admitting that a default notice resulted from human error, Macquarie stated that the Australian Financial Complaints Authority's maximum guidance for nonfinancial loss was $6,300 and then they offered exactly $6,300 in full and final settlement.

The issue for shareholders is not the outcome of that individual matter, but whether it reveals a repeatable group practice of pricing customer harm, effectively acting first and capping the cost later. What controls prevent the independent ombudsman limit becoming a pricing guide for Macquarie's internal complaints process and exposing shareholders to uncapped regulatory penalties.

I'm confident we have a good process for deciding what compensation should be offered. I believe there's adequate controls in place. And beyond that, this is an individual customer matter, and this is not the forum at which we will deal with that. Next question, please.

Chair. Our next question comes from Mr. Craig Caulfield. The question is regarding item 3, remuneration report. The question is, Mr. Ward, will you commit today to your own future remuneration being explicitly reduced if the ASIC, APRA and AUSTRAC matters currently open against Macquarie remain unresolved at this time next year.

And Chairman, given it has just been revealed that Wikramanayake is resigning amid unresolved regulatory matters and the cultural allegations raised this year, will any of her unvested equity or deferred profits be forfeit under the Board's malus and clawback provisions?

Well, the remuneration of all the executive -- the senior executive team is a thing that the Board will decide through the Remuneration Committee process as we normally do each year. And we do not prejudge what those outcomes will be. In Shemara's case, she hasn't resigned. She's retiring. And there's no connection between that decision and any of the matters to which you refer at all.

Next question, please.

Chair, our next question comes from Mr. Craig Caulfield. This is a question for the auditor. The Parliamentary Joint Committee's inquiry into KPMG following the PwC scandal has highlighted the importance of auditor independence and professional skepticism.

At the same time, AUSTRAC has identified systemic mortgage fraud involving billions of dollars in suspect lending across the banking sector. In auditing Macquarie, what procedures did you perform to independently assess the integrity of individual residual loan application files, including whether income expenses supporting documents and digitally generated or AI-assisted documents showed indicators of fraud or manipulation rather than relying primarily on management controls and representations. Can you provide shareholders with a meaningful description of that work?

A, well, thank you for responding.

Thank you for your question, Mr. Craig Caulfield. We design and perform our audit procedures in order to express an opinion on the financial statements taken as a whole with due consideration to relevant matters, including materiality and an assessment of significant audit risks, including fraud risk.

And the combination of all of those procedures enables us to issue our audit opinion. Those procedures include both testing the controls that management has in place to address those risks and also detailed substantive procedures to get us the comfort and audit evidence that we need in order to be able to do so. So it's a combination of all of those that allows us to express an independent audit opinion.

Thanks very much. And Mr. Caulfield, you asked more than 2 questions already. So I'm going to go to questions from the floor, please. The next question in the room.

Chair, we will now take a question from Mr. Michael Sanderson.

A couple of quick questions, but just another comment.

Can you keep the comments brief and just...

Very, very brief.

Thank you.

It's a climate change one: Go nuclear or go extinct. If you want a practical example, compare nuclear France with renewable superpower Germany. And perhaps it's time for a government auditor. Will maybe solve the KPMG and PwC issues. Anyway, first of my 2 questions. Macquarie donated $103,543 to labor, $101,940 to the coalition, often called a bit both ways. Mercer Super reported no political donations.

It was also not invited to the 2025 United States Superannuation Investment Summit. Was Mercer's exclusion coincidental? Who decides which super funds were invited. Now I make that in the context that Macquarie was the sponsor of the 2026 one, I believe.

I don't know who decides which funds were invited, awarded...

You'll have to follow up with the people that did, sorry.

I didn't hear that. I didn't hear that.

I said we didn't decide who was invited, so you'll have to follow up with the people that did. Sorry.

Who did...

Organized by the Australian government. Follow up...

Your next question.

Yes. The annual report says only that in record, some changes were made to Macquarie's -- to funds on Macquarie's platform after Shield. What are those changes? Were any funds removed or restricted?

What problems were found in Macquarie checks before funds were added? And in its later monitoring. Why does the annual report not explain this? Shareholders need to know whether the same risks are still on the platform.

Greg, I'll get you to respond to the work that was done on that.

Yes, there was extensive reviews done. There are hundreds of funds on the Macquarie platform. We didn't identify problems in particular funds that we think have exposed members who are using our platform to risk and so forth.

But we wanted to narrow the number of funds on the platform, and we've restricted it to very, very substantial asset managers so it's just a narrowing of choice. We thought that was important from a risk point of view. But we didn't identify specific issues. We have sent full details of this to people who are users of the Macquarie platform.

Thank you very much, Greg. Can I have the next question from the room, please?

Chair. Our next question is from the Australian Shareholders' Association.

I have a question each for the 2 directors who are standing for election today. Firstly, Mrs. Lloyd-Hurwitz. You have been asked by ASA on a number of occasions about your workload. I'd like to specifically refer to the role that you have now as Chair of the National Housing Supply and Affordability Council, a government body, I understand that's dealing with critical social and economic challenges and that is facing Australia and has high visibility. Can you give us an understanding of your role within that -- as Chair of that council and what impact it might have on your ability to do your role at Macquarie?

Thank you very much for the question. As you say, it is a very important work for Australia to solve our housing crisis, and I'm very proud to be involved in that effort. That's a council that meets 6 times a year. And so it is in no way an impediment to my ability to devote the time that I need to, to the Macquarie Board and the Macquarie company.

Okay. Thanks very much for that. Mr. Vereker, I'd like to ask in the context of ASIC recently having written to company directors saying rapid evolution of frontier artificial intelligence models marks a significant shift in the cyber threat landscape. Given that, would you be able to give shareholders an understanding of how you would contribute to our Board discussions in terms of cybersecurity threat and AI?

Thank you for the question. My background is in financial services as was clear from the earlier talk I gave. I do sit on the Board of the London Stock Exchange Group, which has a very significant and deep technology stack.

And the topic of cyber is absolutely front and center in that Board. So I've had a good deal of Board experience from those discussions in my prior roles in investment banking. Again, the topic of cyber has always been a critical consideration as an executive and the way we thought about protecting against that. And so it's a topic I have a broad familiarity with, but I'm obviously not a deep technical expert.

Next question, please, from the room.

Our next question comes from Mr. Andrew Sommerville.

I'm just wondering, we talk about the big 4 auditing companies. Are there any other auditing companies that we can look at overseas? I know the big 4 owned by overseas people anyway. But are there any other companies overseas that we could look at as an auditor in the future?

Look, it's a question we've thought about, but the reality is this is a very big audit. There's entities all over the world that the auditor has to cover. I really -- it's not, I suspect, just not feasible for firms other than one of the major global firms really to be able to stand up the resources that would be needed to carry it out. I think that's the reality.

The audit is -- I think there's more than 200 entities, something like that, that's part of the audit globally. Macquarie is active in 35-plus jurisdictions. Realistically, there are very few firms, and I suspect none outside of the major 4 that really can do -- can accommodate that. But thanks for the question. Next question from the room, please.

Chair. Our next question comes from Mr. Stephen Mayne.

Chair, the shareholders have paid for all the microphones in front of the top table so get as many shareholders, directors as possible to use them. So a question for Rebecca McGrath. Annual report discloses on Page 165 that Rebecca or a closely related party had a $2.7 million loan from Macquarie at the March 30 balance date and the loan peaked at $6.5 million during the financial year.

It's not a good look for independent directors to be borrowing off a company they govern. Could Rebecca please update shareholders on the current balance of the loan and explain what this loan is for? Will she undertake to refinance with an unrelated organization before next year's AGM so she can just go forward as a director and not as a customer as well?

Okay. There's one, Rebecca.

Thanks for the question. I sought advice about using Macquarie as a lending institution and the company's policies for nonexecutive directors does not prevent us using the bank and its facilities. I specifically changed my banking arrangements to Macquarie because I was deeply dissatisfied with service I was getting from another bank.

And I've heard through a number of people how good the service is, and I was very impressed and continue to be. The numbers that you have there include lending to a family member. In fact, one of my children who went far and wide to look for a very good deal independently of me and found the best mortgage service he could get was from Macquarie.

So I can't comment on the balance. It's my personal business as well, so I'm not going to. But I can tell you that I have complied with all the policies that are required of me, and I have no influence over and no intention to influence any of the dealings of the team in BFS and how they relate to myself and my family.

Thanks, Rebecca. Stephen, do you have one more?

Yes. So thank you for a good comprehensive response, Rebecca. Question on the staff. share situation. I would have thought that given that Shemara is retiring that we wouldn't need to put resolution 4. So in responding to this, can you address that? Normally, when CEOs go, you might pull the bonus item.

I mean Shemara has got $370 million worth of shares, never sold one. It doesn't need the cash, obviously. So I would have thought that pulling that item would have been the thing to do if you've announced the farewell at the AGM. And just on that question of the staff share scheme.

So we're our biggest shareholder in ourselves. So Macquarie owns 7.27% of Macquarie. So it's worth $7 billion. And then when you do the staff bonus each year, you have to acquire shares. And so this year, it was $730 million, and you've actually bought $681 million of those shares off market of other executives and staff members who previously received bonuses.

This is an incredible process that you managed to do a transaction between sort of past and current bonus recipients and literally $691 million and you arranged this sort of private auction. Can you give us some insight as to how it actually works?

Like how many people does it involve? So is it 500 sellers of the 691? Is Shemara one of the sellers of the 691? So how does it work? And do the staff shareholding numbers all appear in the annual report? So are they part of the 226,893 shareholders that you say you've got in the annual report? Because I'm guessing that quite a few thousand of them are going to be staff and staff overall probably own about 15% of the bank.

I mean you've got that 7% stake, which is named. I'm presuming they're voting in favor of all resolutions today. Then I'm guessing a lot of Shemara's shareholding is probably outside of that and then Nicholas Moore with the $600 million or whatever it is. So give us a bit of color about how that actually works, how you run that option and how many people are involved, plus answer the question about why Shemara needs to get another round of bonuses when she's done so well over 39 years.

Okay. So you've answered -- you've asked 3 there. The merit things that we're required to do in order for Shemara to share in the remuneration arrangements that she has well and truly earned and which the Board has awarded. On the other matter, Frank, I think you're probably best placed to explain that.

As you noted, staff are large shareholders of Macquarie, which we think is a good thing. Staff are subject to trading windows. And typically, that trading window is open after results as it would have done post the May results. So what we do is that in relation to the staff sale, there's obviously quite a lot of staff who decide that they would like to sell their shares.

And what we do is that we match it with the merits that we award, but we do it at the share price when the share -- at the share price on the day in which the staff member decides to sell the shares. So it's completely matched at the market price. It doesn't disrupt the market in anything, it actually makes the market much more orderly given the short windows which staff are allowed to sell their shares.

I think that's a good explanation. Thank you, Frank. We're going back now to online, please. The next question.

Chair. Our next question is from Mr. Craig Caulfield. This is a 2-part question regarding Item 5, shareholder requisition resolutions. Item 5A, constitutional amendment. This Board opposes shareholders' rights to formally request information on material risks, yet the federal government has now barred KPMG from new Commonwealth work pending investigation, updated its procurement policy to require officials weigh a supplier's unethical behavior and Green Senator, Barbara Pocock has called for a full ban on new KPMG contracts until the allegations are properly investigated.

If government procurement now demands that scrutiny, why shouldn't Macquarie shareholders have equivalent formal mechanism? B climate strategy and management disclosures. From FY '28, KPMG will also provide assurance over Macquarie's nonfinancial reporting, including the climate disclosures central to this resolution. Given the integrity concerns already raised about how KPMG won this contract, what confidence can shareholders have in the rigor of that assurance specifically?

No comments on what governments may choose to do about KPMG or what Senators have to say. That's a matter for them. As I said earlier, we have confidence in the integrity of the process by which we appointed KPMG on our side. We are seeking the appropriate assurances on what happened on their side just to make sure that, that's okay. We don't have that information yet. If we do proceed, as is the KPMG is scheduled to come to the shareholders in a year from now. If that proceeds, that will be on the basis of confidence on our part about their integrity. Next question, please.

Chair. Our next question is from Mr. Craig Caulfield regarding Item 4, CEO incentive merit. When Mr. Ward's incentive package comes before shareholders, how will it weigh vesting conditions tied to resolving the ASIC, APRA and AUSTRAC matters rather than EPS and ROE metrics alone?

Those issues are taken into account in setting remuneration and they were in FY '26 as is apparent, I think, from the rem report. And the Remuneration Committee will consider any risk matters, financial or nonfinancial as appropriate when we do the year-end processes just ahead of the next reporting date. Next question, please.

Chair. Our next question comes from Mr. Peter Calero. The question is, other than the big 4, EY, PwC, KPMG and Deloitte, is there anyone else capable of conducting the Macquarie given our global diversity and complexity?

I think I've answered that question earlier. So we'll go to the next question, please.

Chair, we return to questions on the floor. Our next question is from Mr. Michael Sanderson.

I apologize for Mr. Caulfield here at all in being here in person, but were getting rather expensive. Macquarie home loans grew by 28% to $181.3 billion. Economists, Dr. Steve Kean warned about high private debt before the global financial crisis. He is now warning that another serious financial crisis could occur when borrowing slows. Does the Board accept that rapid mortgage growth can push up house prices and increase the risk of a banking crisis?

Has Macquarie tested what would happen if debt fell, house prices dropped sharply and one or more Australian banks failed. What would happen to Macquarie funding, cash reserves, profits and capital?

As it happens, we do stress testing quite regularly that covers all manner of possible scenarios, including falls in house prices, global recessions, pandemics, energy shocks, energy prices skyrocketing, collapsing, various other things. So we routinely test all those things. That's how we set our risk appetite and our various limits. So we have looked at these sorts of things, and we're confident that the company is strongly capitalized in any likely plausible scenario, even some pretty unlikely ones.

Do you have a position on Dr. Keen's projection?

Look, a lot of people claim they predicted the GFC. I was around at the time, not too many actually did. I do remember another prediction he made about house prices that resulted in a long walk to Mount Kosciuszko at the time. Only people predict crises. Most predictions are actually not very accurate, but we need to always be mindful of risks in the system, and we spend a lot of time thinking about just that.

Did you predict it in your public position?

Excuse me?

Did you predict it in your public position?

Well, I was around people who had better -- who had exceptional understanding of the risks in the system. Then some of them were raising concerns. I can't say that any of them foresaw quite how it would unfold or exactly when or the depth of it. I think that's very difficult to do.

I will tell my second question. The new deal responded to economic collapse with large government spending, public jobs and new infrastructure. It also increased taxes to 79% on very high incomes, wealth and excess profits. Does Macquarie accept that government spending and fairer taxes can support the economy and reduce inequality? Does it also accept that relying on households and businesses to take on more debt makes the economy less stable and gives more wealth power and risk to the financial sector?

Macquarie is not putting a position on matters like that. These are economic policy questions, I think, for the relevant people and I've had personal views about those in the past, but this isn't the occasion for me to talk about them.

You can if you're allowed.

This is about Macquarie, not about my views. Next question, please.

Chair. Our next question is from Mr. Stephen Mayne.

Okay. So Chair, as you know, these are the 6 things I've asked Macquarie to do over the years that you continue to refuse to do. I'll just rail through them. Annual elections of directors like News Corp Rio, BHP and Treasury Wine Estates, mandatory in the U.S. and the U.K., William, but it's too hard for Macquarie.

Disclose the proxy position early to the ASX along with the formal addresses so we can have a discussion about the protest votes. This meeting is like Anthony Green analyzing the elections with no poll data because you've withheld the proxy. Best practice is to disclose early and discuss it. You continue to refuse not to do it. You don't even disclose it at the meeting while we're debating.

The last year, I walked out had no idea there was a REM strike because you didn't tell us until after they're going to finish talking for 3 hours. So it's just poor practice. Three, follow the agenda. ASA policy. Well, you don't go into a Board meeting and say, has anyone got a comment on anything? You send us an agenda and then you ignore the agenda.

So the debate is all over the place. We should be doing the audit and the accounts at the start. Then we do directors, then we do REM, then we have a session at the end on climate. Instead, you don't want any focus, you don't want to have lots of questions. So you just do one big, all balls in the air. It's poor practice. Keep asking you to not doing it. It's breaching ASA policy.

And Macquarie, I can understand why the senators are frustrated. You just refuse to help out. It's doctor no, it's not the law. Sorry, I'm ranting. But number 4 is -- well, look, the best thing you do is you've got 10 years of video webcast. I'm not going to complain about the transcript you've actually got -- you're actually best in the market on all video of this meeting back to 2014. So well done for that.

Disclose how many of our shareholders vote. Voting has crashed since the move away from paper. Rupert Murdoch got 112,000 shareholders to vote in favor of his move to Delaware on paper. Now it's crashed to 2.2%. So we've got 226,000 shareholders.

If you reveal how many vote for and against, at least we can see the crisis in participation. But you refused to reveal that when many companies are now doing that. So I'm going to ask you to specifically detail how many shareholders voted by proxy before today's meeting? Did you even get 2%? And did you try very hard? Did you get 2%...

I don't know the answer, Stephen.

The share register has got the data, and you can put it in the poll results. That's what good transparent companies do because you ask us to vote and then you hide the data from us. If you want to understand the sentiment of retail shareholders on climate and REM, publish that there were 3,000 in favor and 4,000 against. That's what the good transparent companies do.

Otherwise, we just feel useless because we get swamped by the big shareholders. So please get with the program on that. And then this silly break in the middle. and your press briefing at 9:30. So the press briefing at 9:30 is designed to feed the chooks, get the press away from the meeting.

And then have an hour presentation, a half-hour break. It takes a long time to get to this debate, then you throw the agenda out, and it's just so many breaches of normal governance practice. So please, can you give us something next year?

I don't want to have to do my fourth run for the Board next year because you just won't move on anything. But I will. So can you just -- in answering questions, has there been a more than 10% protest vote on the climate issue today? So 35% last year, all proxy advisers recommending to support the Board's position.

Some press this morning of institutions offshore are going to back market forces. What does Anthony Green say is the poll results on that? Has there been a double-digit protest against the Board's position?

You'll find that very soon because after the votes we have -- we'll be revealing the proxies, I think, before the meeting concludes. Thank you for your suggestions. Is there another question?

Chair. Our next question is from Mr. Michael Sanderson.

Last 2, I promise. This relates -- this is directed at Susan Lloyd. While you were on the Audit and Remuneration Committees, Macquarie received a vote against its pay report. Macquarie also admitted to failures over Shield and received a $35 million penalty for long-running reporting failures. What did you personally do to challenge or correct these problems? And why would shareholders reelect you and support you as Chair of the Remuneration Committee?

Do you want to take it?

Thank you for the question. As a Board and through the committee structure, we took those issues very seriously during the year, and there were consequences -- quite serious consequences to remuneration outcomes, which we've disclosed in a very transparent way, hopefully, in a remuneration report that was completely redesigned and completely rewritten to be more understandable and more transparent around the very significant consequences that were applied to profit share during the year.

As Jillian said before, the remuneration structure at Macquarie continues to evolve, and I continue to make sure that the framework that has worked very well for Macquarie keeps up with the expectations and standards of our shareholders and the community in general as Chair of the Remuneration Committee.

Thank you for that. The second question is Mr. Vereker that's pronounced. While you chaired the London Stock Exchange Group Remuneration Committee, more than 30% of shareholders voted against its pay report. Your department -- your departure, sorry, from Santander U.K. was also reported to involve disagreements over governance and resources. What did you learn from those experiences? Why should Macquarie shareholders believe you will challenge excessive executive pay and demand real accountability?

So thank you for the question. I'm not going to comment on the specifics of other businesses and other discussions. As a broader comment, I think as I went through earlier, my background is a very diverse background, both in financial services and in fact, in government service, both as an executive and as a nonexecutive and as chairing a systemic bank in the U.K. And I think that record speaks for itself in terms of my experience and my ability to challenge where appropriate. Thank you.

Thank you. Are there any further questions?

Chair, there are no further questions.

Thank you. All right. Ladies and gentlemen, there are no further questions. Let me encourage any of you who haven't voted yet. If you haven't, now is the time. We're now going to bring up a summary of the proxy voting. As you can see, proxy votes were strongly in favor of resolutions 2, 3 and 4, strongly against Item 5A. Since 5A has not passed, 5B technically is not put to the meeting.

Item 3 received strong support. Therefore, Item 6 will not be put to the meeting. If you haven't yet voted, I'd ask you to please do so now. Our share registry, MUFG Corporate Markets will act as returning officer and determine the poll results. Could anyone who still wishes to vote, please ensure they've done so now. We're going to give you a minute or so to do that before we close.

[Voting]

Thank you, everyone. The polls will now be closed. The results will be announced to the ASX later today. That concludes the business of today's AGM, and I close the meeting. If you have a handset, please return it at the doors on your way up. Thank you for your attendance and for your ongoing support of Macquarie. Have a great day.

Macquarie Group has announced a net profit after tax of $4.85 billion for the full year ended 31 March 2026, up 30% on the prior year. 68% of income was earned outside Australia. The group declared a final ordinary dividend of $4.20 per share, contributing to a full year ordinary dividend of $7.

Shemara, thanks for joining us. Macquarie's delivered the second highest full year result in its history. How would you characterize the overall results?

Well, as you say, Laura, it was pleasing that the result was materially up on last year. We were up 30% and delivered just over $4.8 billion, and that was a return on equity of 14%, which is an improvement of just over 11% last year. And all of our four underlying operating businesses were able to grow their earnings, which is very pleasing this year. And it reflected the ongoing growth of their client franchises delivering to their clients and communities, but also some responses to the market conditions.

And that, I think, speaks to the diversity of our businesses and why there's such resilience, so that we are able to keep growing franchise but in environments like the ones we've had to respond to market conditions and also then diversity by geography, where we had reasonably even contributions from the Americas, from the Europe, Middle East, Africa region and from the Australasian region and about 70% of our income coming from outside of Australia as we grow globally.

You mentioned that all four franchises were up on last year. What drove the results in each of them?

Well, look, starting with Macquarie Asset Management that was up 27% on the previous year. We had a good year in terms of performance fees and also investment income in that business, which included our realization of our public investments assets in North America and Europe, which freed up capital for us to grow our private markets franchise even more strongly.

And then Banking and Financial Services was up 17%, and that was the ongoing investments we're making in our digital offering that is focused on customer experience that helped us grow, particularly our home loan books and our deposits. So another strong ongoing growth from Banking and Financial Services.

The Commodities and Global Markets, all three business lines, they were able to grow their franchises and earnings in the Commodities business, the Financial Markets and also Asset Finance. And Commodities was able to respond to the environment we had externally. We also had a large realization in the OnStream meter portfolio in Asset Finance.

And then Macquarie Capital was up 43%. And again, across the whole business, both the client service in terms of transaction activity, capital market solutions, but also we were able to grow our credit book and deliver strong earnings from that. And we had realizations in our equity investments.

So all four businesses, as I said, really pleasing that they're able to step up support communities, good diversification across them, but also in terms of capital and funding, we were able to step up in support, particularly CGM and BFS in terms of letting them respond to the opportunities they saw.

Finally, Shemara, looking ahead from the strong results into the next financial year, how is the business positioned moving forward?

Well, I think for next year and beyond, we have four very strong franchises in areas that are positioned for structural growth with deep expertise that we bring, they are diversified across them. So we should be positioned to keep delivering the way we have done historically. And in addition to that, our conservative finance funding, liquidity, capital positions, our risk management, our operating platform should be there to support them as we continue to deliver.

Thanks so much Shemara.

Well, good morning, everyone, and welcome to Macquarie's Full Year Financial Year 2026 Full Year Results. Before we start today, I would like to recognize the traditional custodians of this land, the Gadigal of the Eora Nation and pay our respects to elders past, present and emerging. As is customary, we'll hear from our CEO, Shemara Wikramanayake; and our new CFO, Frank Kwok, this morning. [Operator Instructions].

So with that, I'll hand over to Shemara.

Thanks, Sam, and good morning, and welcome, everyone, from me. And as Sam said, we have our group heads from all around the world with us today to help answer questions. We've also got some of our nonexecutive directors in the front row here. So our Chairman, Glenn; Michelle, the Chair of our Audit Committee; and William, our newest Director, Global Investment Banker, who is here from the U.K. So thank you, William.

So as usual, let me just begin by touching on the footprint of businesses we have. As you know, we've got 4 operating groups that are not only really in areas that are very structurally well positioned for growth, but very diversified contributions across them. And they're supported by our 4 central service groups that help us balance entrepreneurialism with risk management and great operating platform.

Now turning to the results for this FY '26. You'll have seen we announced a result of $4.847 billion, which was up 30% on the prior year. The return on equity at 14% was up 25% on just over 11% in the prior year. And that was made up by increased contributions from all 4 of our operating groups. And I'll touch on briefly the contributions there, and Frank will take you through that in much more detail.

But before going into that, I also just wanted to reflect on the global diversification of our income. You can see here Australia still contributing close to 1/3 of our income, but almost 70% coming from global markets in the Americas, Europe, Middle East and Africa and Asia. And that number, that percentage will probably continue to grow even though we're growing in Australia because those are much larger markets. So turning then to the results by group. And first of all, Macquarie Asset Management, Ben Way is here in the front row.

Thanks, Ben, for coming down and can answer further questions you may have. But the result was up 27% at just over $2.6 billion. As you know, during this year, we divested our public investments businesses in North America and Europe, Middle East and Africa. And that basically has freed up much more capital for the private markets business where we're actively growing that business. And during the year, the private markets equity under management at $218 billion was down 1%. That was mostly due to foreign exchange movements because we were actually able to raise over $20 billion of equity in the period. We also had a very active investing period, investing over $25 billion, and that leaves us with just over $21 billion of dry powder to keep investing in the private markets.

In the public investments, the remaining business we have is just over $300 billion of assets under management. That was up 10%, driven principally by net flows and market movements. So we're very pleased to see how that business continues to contribute. So that's Macquarie Asset Management. Banking and Financial Services, Greg Ward, just here in the front row, delivered another record profit of $1.61 billion, up 17% on the prior year.

Strong growth across the platform there, particularly our home loans, which are just over $180 billion, so up 28%, and that's supported by strong growth, as you will have all seen in our deposits, which is at over $215 billion now and up 25%. We also had growth in the business banking book, which is up about 8% and the funds on platform as well up 1%.

And you can see there growing client numbers, 2.3 million at the moment. Then Commodities and Global Markets, Simon Wright here in the front row as well, $4.221 billion, our largest contributor, again this year, up 49%. And that, of course, benefited from the realization of the onstream [ meters ] the portfolio in the asset finance business. But the asset finance business more broadly growing its franchise and its income streams really well.

The book was up 25% at $7.6 billion. Also on the far right of that page, the Financial Markets business, a strong contribution there as well with continued contribution from futures, but increased contribution from our fixed income and equity derivatives. And then the commodities business in the middle, we had increased volatility in some areas there. And so we were able to service clients a lot more with our risk management and hedging offerings across Global Gas and Power and Global Oil, and we had inventory management and trading increased earnings in North American Gas and Power, particularly in Global Oil.

And then Macquarie Capital, the result there is up 43%. Michael Silverton now here from the U.S. bank at $1.491 billion, increased contribution across all the business lines there. So in the fees that we get from Advisory and Capital Market solutions benefiting from increased transaction activity and increased delivery for customers by the Macquarie Capital team. Also our private credit book, which grew again by 5%, up over $27 billion now, and that was $11 billion more deployed in this financial year.

And then we've been talking for a while about the equity investments, how we're growing that and how it takes some time for the book to season. We're seeing the realization start to come through now in our equity investments as well. So all 4 groups, very strong contribution, up materially on the prior year, but the franchise is growing, which is what's important. And as I said, supported by our Full central service group. So we've got Andrew Cassidy, who heads the Risk Management Group here, Evie Bruce, our Head of Legal and Governance; Nicole Sorbara, our Head of Corporate Operations; and Frank Kwok, our CFO, really driving that result; and Stuart Green, the CEO of Macquarie Bank Limited, sitting in the front row as well.

So then turning to the balance sheet and capital positions. You can see our funded balance sheet continues to remain very strong and resilient and prudent with our term funding exceeding our term liabilities. Deposits are now over $220 billion, as I mentioned, that's been actively grown. And we also managed to issue about $30 billion of term funding in the period. In terms of capital, our capital surplus is up from $7.6 billion at the end of the first half to now $9.3 billion, principally driven by the earnings in the second half, which was a strong half for earnings, offset by the first half dividend.

And then, of course, the capital absorbed in the businesses. And looking into that in a bit more detail, you can see here starting at the beginning of last financial year that net capital absorption is up about $1 billion, but that's because we had $1.7 billion of FX movements in the foreign currency translation reserve, offsetting a $2.7 billion of investment. So quite a bit of investment over this last year. Indeed, over the last 18 months, we've put $4.2 billion of capital to work in the business.

And that's in areas like in BFS, where we continue to grow our loan portfolios across the business. also in CGM, where we're absorbing capital in the credit and the market risk capital areas. Macquarie Asset Management freed up capital from the divestment of the public investments business in North America and Europe, but is continuing to invest in co-investment in funds and seed assets. And then Macquarie Capital, we're growing predominantly now our private credit books.

And our regulatory ratios in terms of capital sits comfortably above the APRA Basel III minimums. And so the last thing I was going to touch on is our dividend before handing back to Frank -- over to Frank. The Board has declared a second half dividend of $4.20, which represents a payout ratio of 50%. Together with the first half dividend, that's a $7 dividend for the year and a payout ratio of 55%, and it's up on the $6.50 dividend that we paid last financial year.

So that, I'll hand over to Frank, and then I'll come back to talk briefly about the factors affecting our outlook.

Thanks, Shemara, and good morning, everyone, and welcome from me as well. Now I'm going to take you through the financial results in a little bit more detail, and we'll start with the consolidated income statement. As Shemara outlined, the group delivered a net profit after tax of $4.847 billion, up 30% on FY '25, representing a strong year with all 4 operating groups delivering high contributions. This does equate to a 14% return on equity. Group net operating income increased 13% to $19.5 billion.

You can see the drivers of this on the slide. Net interest and trading income, which remains our largest revenue component, is up 14% to $10.2 billion, reflecting the continued growth in the BFS loan portfolio, CGM's financing and lending activities and Macquarie Capital's private credit portfolio. Stronger income from risk management, driven by higher client hedging activity across Global Gas and Power, global oil, FX and interest rates and increased inventory management and trading income, especially in the last quarter in CGM.

Fees and commissions income is up 6% to $7.2 billion, reflecting a solid period of market activity with higher advisory and brokerage income in Macquarie Capital, and we also had significantly higher performance fees in Macquarie Asset Management. Investment income significantly up also to $2.8 billion, driven by the sale of the OnStream Meters business in the U.K., realizations and gains in Macquarie Capital's equity book, primarily in the infrastructure and technology sectors in the second half and the sale of a public investments asset management business in Europe and the Americas.

These increases were partially offset by higher credit and other impairment charges and lower other income. We've taken a credit impairment charge for the year of $478 million, and you'll see that $461 million of this charge has been taken in the second half. This increase reflects the greater uncertainty in the macroeconomic environment through our modeled provisions and growth in our loan book. Our actual credit performance continues to be very resilient. But given the current environment, we think this charge is appropriate. Other impairments have increased to $230 million.

Other income has decreased significantly, which predominantly reflects losses within the green investments portfolio, which was transferred to corporate during the first half of the year. Now turning to costs. Operating expenses increased 5% on the prior year to $12.7 billion, which is below the rate of our revenue growth. This was primarily a function of higher profit share due to the operating performance of the group.

We are seeing the impact of cost management discipline while we continue to proactively invest in our technology platforms and remediation programs. Our income tax expense is $1.9 billion for the year, resulting in an effective tax rate of 27.6%. This rate is influenced by the composition and geographical makeup of our operating income. And I note there was a greater contribution from Europe and the Americas in the fourth quarter.

So now turning to the operating groups and starting with MAM. MAM delivered a net profit contribution of $2.6 billion, up 27%. As you can see on the slide, the key driver to this increase is substantially higher performance fees, up $544 million to $1.38 billion. These fees were across a range of funds, including MIP IV and MAF2 in addition to the co-investment fees related to the Align Data sale, which was announced in October.

Base fees, excluding our divested public investments business, have increased $30 million. This has been driven by fundraisings and investments in private markets, together with positive net flows in the Australian public investments business. Investment income has increased $93 million, driven by the net gain on sale of the divested public investment business, but this was partially offset by the gain last year from Rotorcraft. You also see in the charts the lower contribution from the divested business given the sale to Nomura, which closed on the 1st of December. AUM closed at $722 billion for the year. And as you can see, private markets AUM increased $27 billion, driven by $42 billion of investments, $35 billion of positive valuation increases, which has been offset by FX due to the appreciation of the Australian dollar and divestments.

Public investments AUM, now reflecting our Australian-based business, increased $28 billion, driven by positive net flows and market appreciation. Now turning to BFS, which has continued its growth trajectory. Net profit contribution increased to $1.6 billion, up 17%. Personal Banking profit increased by $269 million. The home loan book grew at 3.9x system over the last 12 months with a 24% increase in average volumes. Similarly, there's been a growth in deposits with average volumes up 25% on the prior year.

Business Banking was broadly stable this year with growth in average lending and deposit volumes, offset by margin compression. Wealth Management benefited from the growth in average funds on platform. Operating expenses are slightly higher, reflecting our continued investment in technology. This investment is critical to the ongoing success of our digital banking platform, allowing us to support the business growth in a scalable way. We continue to see strong volume growth across all core products in BFS. We have home loan balances now at $181 billion, representing 7% of market share, and our deposits increased to $215 billion, now representing 6.5% market share.

And as you can see, business banking loans also increased and now at $18 billion. Now turning to CGM. CGM delivered a strong result, benefiting from increased contributions across all 3 business lines. Commodities income increased by over $600 million to $3.6 billion. This increase was driven by higher client-led risk management activity given market volatility, especially in Global Gas and Power and Global Oil and increased lending and financing activity across Energy and Resources. These results were supported by higher inventory management and trading income, primarily due to the elevated volatility in the fourth quarter, driven initially by a brief period in the U.S. winter and subsequently by the broader conflict in the Middle East.

This was partially offset by the timing of income recognition on gas storage and transport contracts. Financial Markets continued its growth with its income up by $132 million, reflecting increased contributions from our financing origination and also growth in client hedging activities, especially across FX and interest rates. Asset Finance delivered strong growth with increased volumes in shipping and technology sectors and with a part year contribution from the Scottish Power meters business, which we closed in September and formed part of the sale with Onstream in March.

Investment income is up significantly by over $1 billion, which was driven by that gain on sale of OnStream, but also a number of smaller investments in our asset finance business in the technology and energy sectors. Credit and other impairment charges in CGM increased by $245 billion, reflecting the increase in wholesale model provisions and overlays, reflecting the heightened uncertainty in the macroeconomic environment and the risk associated with the ongoing conflict in the Middle East.

There were also specific impairments across a small number of counterparties. Operating expenses increased by 13% over the year, driven by significant transaction-related costs and increased investments in the CGM platform, especially in technology and remediation programs to support the businesses and their future growth. CGM continues to demonstrate a resilient and diversified global client base with underlying client growth across both commodities and financial markets. These businesses are truly client-led, and our teams have been focused on expanding our product offering to new clients while strengthening our existing client relationships. As we've noted previously, we're continuing to see strong repeat client business with approximately 75% of client revenue generated from existing relationships.

As you can see on the chart on the left, this client growth is broadly mirrored in the continued growth of our operating income. This growth in client activity is the main driver of the increasing regulatory capital requirements for CGM. This is reflected on the graph on the left, where you can see that credit risk capital is driving the growth in capital usage. As we've seen this year, CGM has benefited from volatility with greater client activity and trading opportunities. Clearly, the other side of that is increased capital usage. I'd note that our market risk exposure remains in line with historic levels.

On the right chart, you can see the daily profit and loss. For FY '26, which is the very dark green line, you continue to see a narrow distribution of daily outcomes with a few more days in the positive tail. This partially reflects the volatility in power and gas in the U.S. in January and more recently, the volatility as a result of the conflict in the Middle East. The chart really highlights our track record of profitability across the year, reflecting the client-driven nature of our business, which is consistent with the fact that we take relatively little market risk.

And it also shows the optionality we have when there is that volatility. And now finally, turning to Macquarie Capital. Macquarie Capital delivered a net profit contribution of $1.49 billion, up 43%, reflecting strong performance across advisory, brokerage, private credit and investment activities. Key components of those results were fees and commission income, which increased by $149 million, driven by strong M&A advisory fees, especially in the Americas and ANZ and the strong brokerage performance, especially in Asia, where we saw revenues increasing by 15%.

Net income from the private credit portfolio increased $114 million, driven by growth in the book with average drawn balances increasing by $2.5 billion over the year, partially offset by higher ECL. Investment-related income increased $133 million, driven by realizations and gains primarily across the infrastructure and technology investments in the second half and which was partially offset by a small number of underperforming assets.

Operating costs were lower in Macquarie Capital, reflecting lower employment expenses. Capital usage in Macquarie Capital has declined modestly over the period to $6.2 billion, driven primarily by decreases in the equity book following a number of realizations. Our capital allocated to the private credit book has increased marginally. The private credit book remains highly diversified with approximately 190 positions across industry sectors characterized by strong operating cash flows and defensive or structurally attractive risk profiles.

The portfolio continues to perform well, and there has been no visible impact on the portfolio quality from AI disruption or the uncertainty in the macroeconomic environment. As you can see on the pie chart, approximately 1/4 of our exposure is in software. As we outlined in the operational briefing back in February, there are a few points to highlight. We tend to lend against operating cash flow, typically in the range of 4 to 8x and not ARR.

We're focused on vertical software companies, ones which are designed for a single or narrow set of related industries due to regulatory or operational needs. And as a result, that software is more embedded in the customers' business. And typically, we service sectors where we have deep expertise, such as government services and education and health care. So now turning to the broader platform. You can see on this slide our regulatory and compliance and technology spend.

We continue to invest significantly in regulatory compliance with approximately $1.3 billion spend this year, slightly up from last year in response to evolving expectations. Technology investment remains a key strategic focus across the group with spend up 5%. Technology now represents almost 20% of the group's total expense base, reflecting its importance in supporting our scalable growth, strengthening our risk management and controls and enhancing client service and operating efficiency.

In terms of the balance sheet, as Shemara noted, we remain well funded and well matched. We continue to have a solid and conservative balance sheet, which is liability led. This year saw a strong period of fundraising with $30 billion raised across a range of products, taking advantage of liquid funding markets. This really allows our balance sheet for that continued growth. We continue to diversify the funding profile in terms of product, currency and investor base. We tend to fund the group quite long, and it's demonstrated in the weighted average life of our term funding, which is at 4.1 years.

The growth in our deposit base continues to be very strong, allowing us to grow our businesses, especially VFS. Deposits grew 25% in the 12 months from March '25 to $222 billion. Deposits are a key high-quality funding source for the bank and now represent 50% of our funded balance sheet. Our loan portfolio was at $253 billion, which is up 23%. The main drivers of this are the growth in the bank with BFS home loans up 28% to over $180 billion, and in CGM as we've grown our book across sectors as we deploy capital and service client needs where financing is secured by underlying assets.

Equity investments were at $13 billion at March 26, down $400 million. We continue to support the growth of Macquarie Asset Management through co-investments in our private managed funds and in seed assets as we continue to raise new vintages and new strategies. You can see the slight decrease in Macquarie Capital, which reflects the realizations in the second half. We have also reduced our green exposure in corporate by almost half to $700 million. This reduction reflects 2 things: the sale of Vibrant Energy, an Indian solar platform that was announced in January this year and also impairments of $379 million over the year, reflecting our assessment of the carrying value of the portfolio given current market conditions.

The vast majority of this portfolio is now in solar. And importantly, we have significantly reduced the ongoing expenditure in the portfolio, reducing it by nearly half over the year. We'd expect this to continue given the smaller scale of that portfolio. In terms of the regulatory update, there continues to be a lot of activity from a prudential viewpoint, especially here in Australia. As noted previously, APRA has released prudential standards to phase out hybrid instruments as eligible capital, including for DOS, which will be effective next year with a 5-year transition period.

We're continuing to invest and are making good progress in the remediation plan that we've spoken about previously through uplifting our governance, culture, structure and systems. You'll note that we had the partial removal of an overlay in our LCR and the removal of the add-on to our NSFR, which was effective on the 5th of February. I also note the relevant conclusions of 2 matters with ASIC in March this year, and we continue to work through remediation associated with the additional conditions imposed on MBL's AFSL license.

Our capital position remains strong with our CET1 ratio at 12.8%, which allows us to continue to support the growth we've seen in BFS and CGM. Our liquidity position is also strong, and we're comfortable maintaining LCR well above regulatory minimums. And now finally, turning to capital management. Over the last year, as Shemara pointed out earlier, our businesses have continued to find opportunities to generate good returns, and we have supported this by allocating additional capital of $2.7 billion.

With the current uncertainty in the macroeconomic environment, it's important that we continue to have the balance sheet to withstand this uncertainty, but also to support our businesses to pursue opportunities that the current environment may provide as we see in the last quarter. As Shemara outlined, the Board has resolved to issue shares for the DRP with a discount of 1.5%. The Board has also resolved to conclude the on-market buyback, noting that we have not bought a share in the buyback for over 18 months.

And over that period, we've seen good opportunities and deployed in excess of $4 billion of capital across our businesses. In relation to the merits of approximately $740 million, the Board has resolved that we purchased those shares to satisfy that requirement.

On that note, I'll pass back to Shemara.

Thanks, Frank. So I'll take you through our outlook and as usual, start with the factors that affect our short-term outlook by each group. So first of all, Macquarie Asset Management, following the divestment of the public investments in North America and Europe, we expect the base fees to be broadly in line, excluding that one matter. And we expect our net other operating income to be up on the previous year, and that's including the divestment of Macquarie Air Finance, which will complete in this financial year.

Banking and Financial Services, we expect ongoing growth in our loans, our funds on platform and our deposits to drive results, and we will continue to be investing in our operating platform and technology to drive better customer experience. And those results, of course, will be impacted by market dynamics in terms of margin pressure. For Macquarie Capital, subject to market conditions, we're expecting broadly in line income from both transaction activity and investment-related income.

And for Commodities and Global Markets, again, subject to market conditions, we're expecting our net operating income to be broadly in line, excluding, of course, the realization of the OnStream meters that we had in FY '26. At the corporate level, our compensation ratio and our effective tax rate, we expect to be broadly in line with historical levels. And as usual, I have to note that this short-term outlook is, of course, subject to a range of factors, market conditions, completion of period-end reviews and completion of transactions, the geographic composition of our income and the impacts of foreign exchange and potential tax, legal or regulatory uncertainties.

And because of that, we continue, as Frank has also said, to hold our ongoing cautious stance in relation to funding, capital, liquidity, et cetera, that position us to respond as environments may change. Medium term, we, of course, remain confident that we can deliver good returns for the risks that we take given the diversified range of businesses that we stepped through and strong support platform we have, including our risk management, our operating platform and our funding.

And the last thing I'd touch on before handing over to Sam to take questions is in terms of the returns of our businesses, you can see there, as usual, we group them into Macquarie Asset Management and Banking and Financial Services that are typically more annuity-style businesses, but have, over the last 20 years, delivered returns on equity of 21% and did the same in this last financial year. And then Commodities and Global Markets and Macquarie Capital together have delivered 17% over the last 20 years on average. This year delivered 19%. And after taking into account our surplus capital of $9.3 billion, that results in a return of 14% across the group, which is consistent with the 20-year average.

So with that, I'll hand back to Sam and Frank and I'd be happy to answer questions.

Thank you. Thanks, Shemara. Thanks, Frank. So we'll start with questions in the room, and then we will go to the lines. So if we start with -- I'll start with Ed.

A couple to start with. You talked in both CGM and MacCap about market conditions. Can you just say what are you considering the market conditions at the moment in your outlook? Are you considering in line with FY '26? Or you talked about the uncertainty going forward, assuming a little bit of slowdown in growth in both those -- in the outlook for those divisions?

Yes. So as I said in the factors that affect short-term outlook, the market conditions are hard to call and can impact results. CGM obviously benefited from the situation in the energy markets, which has helped them and Simon can comment on how we're tracking through April. But we won't know how that will play out. It's changing very fast, as you know. In terms of Macquarie Capital, the result there is driven principally by the private credit book.

It's sitting now at $27 billion, and we've said that, that earns 4% to 4.5%. It's driving a huge part of Macquarie Capital's earnings. Then the equity book, as we've said, is now starting to season, so we can see realizations coming subject to the markets being open, obviously, and we said that would be second half weighted. In terms of the activity from fee income, a large part of it is driven by private credit and the equity realizations. The fee income, I think Michael Silverton was talking with me this morning saying that we are seeing slightly more subdued activity, but we think that should be a shorter-term thing. I don't know if -- I might let Simon first just comment on market conditions for April and your view as we go through the year and then Michael Silverton on capital.

Thanks, Shemara. Thanks. So as we know, market conditions for us in the last quarter were particularly buoyant, driven by the Middle East conflict. So the outlook continues to be uncertain. So when we think about our business mix, as we know, we are driven by a large part of client-led business and style income and also there's that market risk optionality in the platform. So as we go into this year, the outlook, one of the things we are cautious about based on experience is that volatility is welcome, but prolonged volatility does tend to lead to more subdued client appetite.

Clients get cautious about what the future looks like. So what we do know is a lot of this volatility now is being led by announcements day-to-day, good for volatility, difficult for future prediction for clients. So right now, we have got some tailwinds coming into this year, which is good. But as I said, we're cautious about what client activity, which makes up the majority of our business will be like for the rest of the year. So we've been optimistic but cautious.

I just add that our mandate levels are actually very robust and pretty much an all-time high, but we're being cautious about conversion of those mandates into actual transactions. And then on the software front, whilst we feel very comfortable with our equity and credit positions, there has been lower velocity in transaction activity on the software side. So we're forecasting that, that may impact the first half.

And sorry, just to clarify, when you say broadly in line for both those divisions, that assumes those outlooks that we've just talked about?

Yes, that's right. So broadly in line with the FY '26 delivery, taking that into account. And I would say the things we're talking about, if I can use the expression, they're icing on the cake in the earnings of these 2 groups, the vast majority of CGM is client-facing repeat income and the volatility contributes to that extra inventory management and trading and maybe a little bit of client activity. Similarly, in Macquarie Capital, the vast majority is coming from private credit and these equity realizations and the activity in clients in the transaction side is impacting that.

John...

John Mott from Barrenjoey. And continuing on that same theme, we've been talking a while when we're over in Europe a year and a bit ago, it was all the discussion was the realization is really going to mature. 2027 is going to be the golden year. It was -- this is the year when everything should come good. Now we don't know what's going to happen around the world. But when you look at it, you're looking at a good year for performance fees, asset realizations coming through in MacCap, capital deployment.

It really seems like touch wood as long as market conditions remain okay, it should be a pretty buoyant environment for the next year, at least from a revenue perspective. And just going through, do you then expect to be able to look at other opportunities. One of the great things from Macquarie is never waste a crisis. We saw that in the GFC. We've seen it many, many times. Is there inorganic opportunities you can use given you've got a lot of dry powder across the business?

Yes. Well, basically, the way our inorganic opportunities are driven is each of the operating groups has areas strategically that they're looking at. And certainly, in Macquarie Capital, we're constantly investing in equity positions in digital infrastructure, energy transition and social infrastructure.

But things like the meters opportunity, CGM drives because our asset finance teams see the opportunity. So I think I'd confirm your point that we have good capital and funding to support our teams if they see opportunity, but it's really driven by each of them spotting the opportunity. As you'd expect, they're constantly looking for things. We're not seeing, I have to say, huge dislocation in pricing at the moment. For example, the Meta transaction we did was a competitive process. We bought this.

We were able to add a lot of value by combining it with our existing portfolio and then delivering it to a slightly different group of investors. But that was alpha that the team was able to particularly add. It wasn't because we were able to buy particularly well. And correct me if I'm wrong team, but we're not seeing huge dislocation in pricing at the moment.

I mean on the software side, it's mainly been in the public markets where we've seen a significant dislocation, but it's been also in large caps where probably wouldn't be a target market for us.

Just pass over to Matt.

Matt Dunger from Bank of America. I was wondering if I could ask about Macquarie Capital. You had an expectation for an uptick in realizations. Slide 29, it looks like only about $0.5 billion or less was released from capital from the equity positions. Can you talk about how many of those converted that you had plans to sell and the potential outlook for more asset sales going forward?

Yes. Basically -- and I'll let Mike comment further if you want, but I'd say first that we're basically in line with what we expected. So we put a few more billion to work, if you recall over the last few years. And we were very clear with the market that, that would take some time to season. And -- but it would be a drag on ROE in the short term while we did that. I think we've hit our stride now in terms of realization.

So we'll keep turning the book, realizing as we invest. I think we've reached the point when the book has matured to a point where we'll have realizations. We weren't rushing things for the sake of the financial year. We're very focused on exiting these assets when we can get the best return for the risk. And the ones we were looking to exit, you saw on Frank's slide that we had digital infrastructure realizations, principally some in energy infrastructure, but those ones were ready to exit. So we have a book now that's operating at a level where we should have realizations. Michael?

Yes. I'd just say we were pleased with the realization activity in the second half, and it was in line with what we were expecting. And I think that shows up in the numbers. We realized prime data centers in that period, very strong return, and that was the bulk of the return in that last period.

And we're guiding that second half of next year is when we see the next -- it will be a little bit lumpy, but each particular investment, they're lumpy investments in this book of a couple of billion.

Great. And just a follow-up. If I could just ask about the private credit portfolio and your willingness to continue to deploy capital there. It hasn't grown as quickly as what it had been previously. Michael has previously talked about the spreads on that portfolio needing to be at higher levels potentially before we see more growth. Are you able to comment on that?

The spreads are holding up. They're 4% to 4.5%. The credit performance is holding up. It's a really high-quality book in terms of both the credit and the return and the ability of our teams to spot opportunities. It's a 27 billion book now in a market of $1.8 trillion, and they have deep expertise in the sectors and regions they invest in.

What has been constraining our growth is the concentration factor. I think we've been very clear to the market that we were reaching a level of concentration where we now are looking to bring third-party capital in. What has happened as Greg has been able to grow the BFS book and Simon's team have been growing in financial markets is that the other books have grown as well. And we keep that diversification very tightly managed.

So that's allowed us to provide a few more billions to the private capital -- private credit team this year. But we will tell you that we haven't been -- the post streams have been tight because of concentration, and that's what's been holding their growth back with our balance sheet. We are really looking to bring third-party capital alongside now through separate managed accounts and through fiduciary. Michael looks like he wants to add something there.

I'd just say it was a strong origination year, $11 billion, about $7 billion of it was new origination, $4 billion refis and add-ons to businesses that we're already invested in. But on the software side, we -- there haven't been as many transactions occurring. We've been a bit more prudent. We've seen the most opportunity in Europe over the period. And one of the benefits of the strategies we run is that we didn't allocate the capital where we see the opportunity, and we've seen it in Europe and also in some real estate sort of press-like opportunities as well that there's been good opportunity there.

There was also quite a big realization here. So net, we were able to deploy more because they were freeing up capital themselves. But ultimately, the net scheme growth is driven by concentration appetite.

We'll go to Andrew.

Andrew Triggs from JPMorgan. Maybe a follow-up to Michael. Just what you're seeing in terms of financial sponsor conditions still seems to be quite slow there and a lot of dislocation still within the alternative asset management universe. And then also just the prospect of sort of recovery in that market. The IAC business seems to have done a lot of the heavy lifting I guess if you consider the infrastructure assets you have, that equity investment line did fall in that business. So just interested to refilling the pipeline, have valuations risen in that market.

Yes. In the M&A market, a lot of the growth has been driven by large mega cap activity. The volumes actually in the M&A market are down, which is a function of sponsor activity. The capital markets are open, but one of the benefits that sponsors have is that they can decide when to launch processes. They've got time to do that. And with the advent of more options they have around continuation funds, NAV lending and the like, it's allowed them to provide returns to their LPs in other ways, it's not optimal to sell. So the sponsor activity has started to pick up, but it's in probably outside of those software sectors initially and the bulk of sponsor activity has been around software and services.

And in terms of realization activity, we're excited about some of the AI opportunities within our equity book, but they're not yet at the point of monetizing them. And so we're seeing growth there that we'll continue to pursue, but it didn't show up so much in the results in this half.

And typically, we're holding these equity positions 3 to 5 years. So the timing of investment and realization may change depending on what the external market is like. So if there's dislocation, we'll probably be investing a bit more. If there's a buoyant market, we'll be realizing a bit more. But typically, after 3 to 5 years, you'll see the book at a level of churning, which is where we're getting to now.

And just replacing that infrastructure energy capital equity investment portfolio, which has probably been more fat on the radar, but does earn good returns over a long period of time.

Yes. The infrastructure and energy [ definitely ], do you want to comment on?

Yes. And we still have some digital infrastructure exposures in there. We have Onvia in Spain. We have a few data center investments in Benelux and in India. So they may come through in the coming periods.

Brian, we can maybe just pass the microphone across.

Brian Johnson, MST. Shemara, congratulations on a cracking result. Shemara, when we have a look -- I go back to Europe trip, whether it was deliberate or not, I think everyone left the room with the impression that there was a real chance within MAM of a private credit acquisition. If we have a look at the MacCap slide today, I noticed it's gone from private credit to principal finance back to private credit. I'd just like to understand you're raising capital effectively today. The market was worried about private credit acquisition on that trip.

Private credit subsequently, we've not in your book because your book is structurally different. But could you just run us through what is the risk or the risk or the benefit of a private credit acquisition in MAM? And what would be the criteria that you would look at? Because I think the big takeaway from today, a lot of kind of like organic investment opportunities within Macquarie to grow. But the -- I suppose the risk, the positive or negative is that we actually see something beyond that. So private credit, the criteria, or is this just about organic growth opportunities?

And I'll let Ben comment. But as Ben has said, strategically, 2 areas is really looking to grow. One is in terms of the channels where we've had largely an institutional business and there's excellent work being done growing into the insurance channel and the wealth channel. And the other is in terms of asset classes where we're very, very big in infrastructure. We've grown into other assets like real estate and private credit is a key area that we're looking to go to, particularly in those 2 other channels, Insurance, it's a big part of where insurers allocate and in wealth as well, there's a lot of interest.

[indiscernible] is sitting behind Ben there, but we basically have across that credit area, we do have our global fixed income in terms of the public credit, and then we're looking at leveraged credit in terms of the private markets. We also have very big infrastructure debt, and we're growing into other channels alongside there. And then we have the Macquarie financing business for insurers, and we have grow something called Evo Re. We are looking principally to grow organically, but definitely looking to grow inorganically if we can find good return for risk and Ben has actually done some of that. So I might hand over to Ben, too.

Good morning, everyone, and thank you for that question, Brian. I think first and foremost, our criteria is, will this be good for shareholders? And is it complementary to what we're doing? And is it something that we can't do organically. So the vast majority of growth we're seeing in the business today is about disciplined allocation of capital to teams that have a real conviction around a specific thematic, whether it be wealth, whether it be infrastructure adjacency, infrastructure secondaries, whether it be in credit, and we allow those teams to build those businesses because we actually get the best returns for shareholders, but we also do it at the lowest risk, particularly in terms of execution and culture.

So our criteria really is, is this beneficial to shareholders? Is it something that we can't do. But in particular, is this a business that we're potentially buying that is both complementary to what we're doing, but also has great investment performance. And you might have seen during the year, we bought Spire, a CLO business in the U.K. We've launched organically a CLO business in the U.S., and we actually just in the last week, have put our third CLO into the market there.

Spire is the largest independent CLO business in Europe and the U.K. and has consistently top quartile performance. and that's over 15 CLOs. The reason we bought that business is it makes sense from a shareholder returns point of view, but also it really gives us scale in an area that would take us much longer to grow, but it's complementary to what we're doing elsewhere and gives us a better offering for clients generally in both America and the U.S.

And at the half, we got very comfortable because CLOs are less penetrated in Europe. In the U.S., that's become much more an established asset class. And Spire is really well positioned in terms of their track record, et cetera, together with our distribution capability, hopefully.

Just push my luck though. If we look at the public markets business that you've divested, that was also a great acquisition when you made it. And it was all about adding value to the private markets business. But the reality was the difference between the revenue and the cost wasn't particularly high. So I suppose what I'm really asking the real question is, when you're looking at acquisitions, inorganic acquisition opportunities within MAM, having turned back into very much the public markets business, which has got a much higher ROE, would we actually see make acquisitions that actually dilute the high ROE that we see in MAM?

Yes. Look, just on that public investments business, we were very clear that we divested it to free up capital because MAM is intensely using capital now in organically growing the business. And the public investments, even though it was a great business, it was holding capital, but we were able to realize a lot of capital from the exit of that. When you say the cost breeding up the revenues, it was making meaningful base fee profit for AMNI, as you call it, asset management net income, which we have exited. And despite that, MAM has managed to grow its earnings this year in the private markets. So we were making good investments and acquisitions there. We divested it to support MAM.

The capital MAM has absorbed has been largely in its organic growth of its business, but we also spent some capital on an acquisition. So to us, strategically, it makes great sense that we had to sadly make a call that we're going to try and be a diversified asset manager to pursue the opportunity we see in private markets do we double down and that was thinking. Ben, anything you'd like to add?

No, nothing to add.

We'll go to Richard.

Richard Wiles from Morgan Stanley. Shemara, it's been a pretty extraordinary year in terms of global developments in energy and commodities, technology and private credit. Does it make you more positive on your long-term opportunities? Or is it too early to tell what the structural changes might be in these markets?

Yes. And Richard, I know you've been following us for a long while, but there's always stuff like this happening. If you go back through my decade here, the 1987 crashes, the tech boom that we had, the dot-com boom, the GFC, the pandemic, which was something we've never experienced. So there's always something happening. We've had energy shocks multiple times.

We've had tech developments over the period. For us, basically change is challenge, but it's also opportunity. So we're just looking for the change at the time and how our businesses can respond to it. And each of them think through that based on their expertise. So with what's playing out in technology, we don't know who the exact tech win will be, but we are not a software player or a tech player.

What we are is an infrastructure player, and we know that the demand for compute is going to accelerate heavily, and that means infrastructure demand is going to step up a lot, whether it's data centers, whether it's energy, whether it's cooling, whether it's all the critical minerals that are needed for this in chips in the compute part. So MacCap can play in that MAM and play in that CGM can play in that.

There will be aspects that BFS can play in as well, and they each will determine as we see a change happen, where does our business have the opportunity to deliver solutions. So I think with -- whether it's energy or tech at the moment are probably the 2 big things, tech off the back of it a little bit in private credit, but that seems to be a liquidity issue because private credit has gone into the retail channels a lot and so some extra credit issue coming from that.

So both the changes are challenging, but they also are opportunities. I could let each of our group heads even Nicole, who's running our corporate operations, the tech is creating opportunity for us. BFS is seeing a lot of it. I don't know actually, Greg, did you want to comment briefly on technology and what BFS is competing to today where the frontier is...

Yes, you're quite right. I think the technology landscape has changed a lot over time. You think of cloud and mobile and what that's done in terms of the opportunity that's presented to BFS, which we didn't have before. And now we're in this world of AI and so forth. And what that will do in terms of, I think, efficiency and customer experience, it's very, very exciting. So we're looking forward to these changes.

Yes. I mean on the one hand, BFS is on the forefront of what's happening with opportunity. I don't know, Nicole, if you want to comment briefly on the other hand, things like MS and how we're really prioritizing the risk management as well.

Yes, sure. As Greg said, there's a lot of opportunity that comes with AI. But as we've seen with the recent announcements and with MO, there's also a lot of risk as well. So it's about balancing that. So we need to be far more automated. We need to be a very secure organization. We need to have controls being built in everything we do. We've got multiple layers of defense. It's about enhanced protection, enhanced scanning, but huge opportunity. And we're seeing some of that come through now through the P&L in terms of productivity savings as well.

Does that cover it, Richard?

If there aren't any other questions in the room, we'll come back if there are. We'll go to the line. [Operator Instructions]

Our first question today comes from Brendan Sproules from Goldman Sachs.

It's Brendan Sproules from Goldman Sachs. I just have a question on the private equity portfolio and how the environment for the market changed in the first quarter. I think at the operational briefing that you gave in February, you said that portfolio was $29-odd billion. It's now down to $25 billion. Obviously, that is also impacted by currency. And then in the MD&A, you show that your overall net interest income in Macquarie Capital has gone down.

You talked about higher funding costs. Can you maybe talk about the growth in the portfolio in that fourth quarter? And then particularly around the net interest margins that you're getting on this portfolio and how they've changed in the fourth quarter relative to the previous 9 months?

Yes. Frank, why don't I let you take?

Brendan, it's Frank here. I think you're just putting at the spot of private credit that we have on the balance sheet at any particular point in time. And obviously, what's important is what we have drawn over the period. So over the period, we've actually had additional drawn balances in our private credit book in Macquarie Capital up $2.5 billion. In terms of the net interest income, that continues to be, as Shemara said before, between the 40 and 450 basis points. Nothing has changed there. As we talked about before when Michael was talking, we've deployed circa $11 billion over the year and some due to refinancings as well.

So there continues to be good volume across that platform. We have seen a bit more of a bias to Europe, where we're seeing better opportunity from a risk return basis, but nothing has really changed in terms of that portfolio. As we discussed before, from a group perspective, obviously, we need to focus on diversification and making sure that we've got the right allocations in the right buckets.

And as Shemara said, one of the factors that we take into account for that book and any other book that we have is what limits should we have in terms of the amount that we have on the balance sheet. That number has obviously grown over time as our balance sheet has increased, but we're very comfortable with the position we have today. And as I said, the returns are still at that 400 to 450. Ultimately, if the team can't find the returns at that 400 to 450, that just won't right. I mean it's as simple as that.

And also, Brandon, I'll just briefly add that Frank had a slide showing we have about $6 billion of capital in Macquarie Capital in terms of the balance sheet. About half of that relates to the private credit book, which is about $27 billion, frankly, to $3 billion. So that leaves about $3 billion in equity. That equity is also spread over 4 different areas, Michael, isn't it? So we've got the venture capital tech business. We've got the growth technology. We've got the infrastructure and energy capital and then the private credit team also invest in more mature assets.

Our required returns vary with the risk involved in each of those equity strategies. But the reason we have the capital there is our teams have proven they can deliver alpha in each of those areas. And so we have hurdles that we set for them, and they look to beat those. And if they're continuing to beat them, we deploy further capital. If not, we'll pivot. But I think we're comfortable for delivering at the moment on equity as well as the private credit.

I have a second question on performance fees in Macquarie Asset Management. Obviously, a huge step-up this year, including performance fee from MIP IV, which is obviously only sort of 6 or 7 years into its life. Could you maybe talk about in '27, which particular funds are likely to contribute to performance fees? And I guess the outlook over the next couple of years?

Yes. As you noted, performance fees over the year were strong, mainly from MAF2, MIP IV and the co-investment fees from the Align data center transaction. As you pointed out, performance fees are usually generated at the tail end of a fund. MAF2, we've had a number of years of performance fees, and that continues to exit investments. Bit is now beginning that stage with [indiscernible] Data Centers obviously being a major divestment there.

And typically, we only book performance fees when there's a highly improbable that we will reverse them. So it's a conservative position, which we think makes a lot of sense. And so our expectations are is that we continue to exit those assets in those funds, performance fees will be generated. But in addition to those funds, we also generated performance fees from MCOF V, a Korean private equity fund co-investment vehicle that we had over the last half. So we've obviously got a very diversified platform. They're the major ones. But the other thing I'd probably note is that we have a number of open-ended funds in Macquarie Asset Management, which generates continuous performance fees, obviously subject to performance, but we're seeing that flow through as our open-ended funds are a growing proportion of the equity that we have across MAM.

And Ben, the only other thing I'd mention is we generally have good visibility when we are forecasting performance fees because we have a test of highly improbable risk of reversal across the whole fund. So we set a quite high bar.

We do set a high bar. And I think what we've seen over the last 12 months is very strong appetite for the sorts of portfolio companies that we own where our clients and our counterparties are really looking through events and looking through the markets and looking at the underlying fundamentals of those businesses which are generally in sectors that have very strong thematic tailwinds.

And so we are being prudent about our asset sales. But when we are bringing portfolio companies to the market, it is the strongest appetite we've seen for those companies in some time, and that continues to be the case today. So we feel good about the quality of the portfolio. We have in excess of 190 portfolio companies today, but also the ongoing appetite for those, both from other financial sponsors but also from strategics. And I think Align has been a very good example of that over the sort of last 6 to 12 months.

Our next question comes from Andrew Lyons from Jefferies.

Just a question that's a bit of a continuation on the response to Richard's earlier question on BFS and particularly the cost performance. Costs were down in the second half and up only 4% over the year, well inside revenue growth. I also note the disclosures around group regulatory and tech expenses are showing signs of finding a bit of a peak. Just to this end, can you talk to how you think about the fixed cost leverage in the BFS division? And over time, how should the CTI of the BFS division trend, how low do you think it can ultimately go?

Yes. Thanks very much for the question. Yes, we are expecting some good cost leverage. You saw the cost-to-income ratio go down during the period, I think, from 54% down to 51% overall cost to income. We expect that to continue to trend lower as we get more scale. There were some one-off expenses in this year that had a bit of an impact. So -- but for that, we would have been close to a flat cost performance on that rising volume growth in deposits and home loans. So it would have been quite a good gain there in terms of leverage. And we should see, as I say, very, very limited headcount growth going forward and hopefully, good business.

There are no further online questions at this time.

Great. Come back to the room. So Brian, do you want to...

Macquarie is very good at picking very, very long-term thematics. We can already see the energy transition, at least in the U.S. that's fading away. But I'd just be interested globally, what is the really big forward thematic that's going to outlive you and out with me that Macquarie is investing in today? Well, what is the next big thing that you've identified that you're investing in now?

Yes. Look, generally, we tend to be very nimble and move on things as they develop. But I know Ben sitting here, and I know in our infrastructure business, all of them will have thematics like Ben, we talk about demographics and population growth and the huge demand that's going to have for a lot of our services. We talk about technology and digitization and what's going to happen there. We talk also about energy transition what do you call it, decarbonization in terms of -- but basically, the world needs as the population grows, we need a lot more energy. We not only need to deal with the climate issues, but we need to deal with the transition and firming solutions. And that not only impacts your business, but also Simon's business.

What we call, deglobalization.

Deglobalization. As a client person, I have a succinct framework, which is the 4Ds and Shemara has talked about that. Almost everything we do is somewhat related to not just in MA, but right across Macquarie, the demographic issue of increased savings or people need different housing options, both newer renters or people moving into the senior world, if you think about that. We're obviously being very active in digitalization.

And you're right, Brian, a lot of people have talked about playing in the digital infrastructure sector in the last 2 or 3 years. We've been doing that as a group going back 25 years, but in things like data centers going back almost a decade, and that's certainly where we're able to drive and generate real alpha by spotting that early. If you think about decarbonization, I think today, you can probably think about that as energy solutions.

Never before have we seen a demand from communities more around the world for energy solutions, particularly as that intersects with things like the opportunity to take advantage of AI and the compute power needed, but the energy to sustain that. And the last one would be deglobalization. And that's really about national resiliency and national sovereignty. And it's an interesting to think about. We used to have sectorial funds or single country funds, and then we move to regional and global funds. And now there's clearly a real demand, whether it's countries setting up their own resiliency funds or expanding the mandates of the sovereign funds to focus much more on home.

And I think that's not something, to be honest, we were talking about, I think, as an industry as vibrantly as we are today as we were 2 years ago. And so the opportunities whether it will be around supply chain security, whether it be around data security, whether it be about countries, focusing much more on their defense security and the things needed, that will be a huge thematic for all our groups going forward to the coming year.

Right. That deglobalization is a newer one in terms of supply chains and global alliances changing. But ultimately, though, I have to say Ben was thinking about these businesses, and we really respond locally based off our expertise for the sort of things man will be investing in, in South Korea, and we've gone into some very new areas there, driven by the South Korean team seeing opportunity for this defensive sort of investment.

Here in Australia, the things that we've gone into in terms of registries, et cetera, early on going into data centers is driven by what the team are seeing as the needs in the local community. And I guess our business is are scaling up where we can just focus locally and deliver based on our expertise because at a macro level, there's so much needed in your teams now. Anything, Frank, you want to add?

Nothing to add there.

Right. There's no further questions. Thank you for your interest today. Thank you for your support, and we look forward to catching up with you over the next couple of weeks. Thank you very much.

Well, good morning, everyone, and thank you for joining us here today for Macquarie's Third Quarter and Third Quarter '26 and 2026 Operational Briefing.

Before we begin today, I would like to acknowledge the traditional custodians of this land, the Gadigal of the Eora Nation and pay our respects to elders past, present and emerging.

Today, we will have a third quarter update, which will be given by our CEO, Shemara Wikramanayake, followed by a Q&A session. We'll then hear from each of our operating groups talking about Macquarie's presence here in ANZ. And then we'll hear from Andrew Cassidy talking about risk and Nicole Sorbara and team talking about technology.

So, with that, I will hand over to Shemara. Thank you.

And good morning, everyone. Welcome from me. And I should note before I get going that we have all our operating group heads here in the front row as well with Ben Way and Michael Silverton joining us from overseas. We've just got Greg Ward traveling, but they're all here for questions if needed.

So turning to the third quarter. We'll start with this slide as we always do, that just notes our four -- footprint of our four operating groups and the four central service groups that support them and the mix of our income. This is no different to what you saw at the end of the first half. But turning to the third quarter result. As we mentioned throughout this year, we expected the earnings to be weighted to the second half over this financial year, and we saw that play out in the results for the third quarter being in line with what we expected.

So, Macquarie Asset Management was substantially up both on the third comparable quarter and the year-to-date. And that was driven by in the third quarter, as you know, we had the completion of the divestment of the public investments in North America and Europe, and we also had increased performance fees for the year-to-date period. Then BFS is up slightly on the prior quarter and the year-to-date, and that's driven by ongoing growth in our volume, in our loans and also in our deposits, offset to some extent by margin compression, and that's competition, but also the runoff of the car lease portfolio, which was a higher-margin business. And then in CGM, the result in CGM is up on the prior comparable period, and it's in line with the year-to-date for last year. And the catch-up that we had in that third quarter was mostly driven by an increase in our asset finance business. And then Macquarie Capital, also like Macquarie Asset Management, substantially up both on the prior quarter last year and on the prior year-to-date. And that was driven by the ongoing growth of our credit book that's delivering consistent earnings, realizations in our equity book. And in the fee and commission income, we were up on the full year-to-date versus last year, but the quarter, we had a very big quarter last year.

So looking in a bit more detail at each of our four operating groups and where they sit at the end of this quarter. Macquarie Asset Management at the bottom there, you can see, as I mentioned, we completed the divestment of our North American and European public investments, which is about AUD 250 billion of assets that we've now transferred to Nomura. But people may not be as aware that in Australia, we have now $314 billion of assets under management in public investments. and that is up 5%, and that's being driven by inflows mostly into fixed income, but also favorable market. And you'll get a bit more of a deep dive on that business today.

In private markets, we're at about $227 billion of equity under management, which is up 1%, mostly driven by fundraising. We had a good fundraising period of $6.3 billion, investing of $7.7 billion, and we're sitting with dry powder in the private markets business of about $25.9 billion. Banking and Financial Services, again, strong growth in our home loans, up 7%. Our business banking also up 1%, and that was supported by deposits, which are up 6%. The funds on platform were down 1%, and that was due to market movements in the composition of our funds on the platform. And then turning to Commodities and Global Markets. As I mentioned just now, the asset finance business is up with growing in our shipping and meters book. Financial markets are in line. And in the Commodities business, we had an improved performance in the North American Gas and Power and Resources business, particularly. Now that performance was offset to some extent by the increase in costs, as we talked about in the first half as we invest in the operating platform remediation programs, and there were some transaction costs as well in the third quarter as in the first half. And then Macquarie Capital, big contribution there was private credit is a big contributor, and the book was up $5.7 billion to $28.9 billion. In this period, we also had equity realizations, which have, as you know, the book has been seasoning and we're getting into a period of more realizations, the Parkingeye and IPlanet assets in Europe. And then as I mentioned in relation to the fee and commission income, this year, activity levels, we had a strong year last year as well, but our activity levels are up, although the third quarter last year was very strong.

Then turning to the balance sheet side of it and the funding, capital funding, liquidity. You can see our ratios up the top there, our CET1, leverage ratios, LCRs and NSFRs, all comfortably above the Basel III amendments. And the other thing I'd note on this page is our surplus capital is at $7.5 billion, which is down $1 billion, and that's because we paid out the second half dividend. So that's slightly offset by the 3Q earnings. but also absorption of capital into the businesses. And in terms of that absorption, you can see in this last quarter, CGM, we had about $800 million in credit capital as we head into the Northern winter as well. We also had in Macquarie Capital, as I mentioned, the growth of the private credit book absorbing capital. But in Macquarie Asset Management, we released several hundred million of capital with the exit of the public investments business in North America and Europe. And BFS, even though the books were growing, it was flat because of the runoff of the car leasing.

Then looking at update on regulatory and legal matters, and we regularly give or we always give an update on this. In terms of regulatory, the main thing I'd note there is that we had -- APRA recently announced the reduction of the add-ons in our LCRs and NSFRs, and we're continuing to work with APRA on the range of programs we've discussed with you before. And similarly, with ASIC, we -- between us have agreed in relation to the short sell transaction reporting matter that we will submit to the court a $35 million penalty.

So the last thing for me to cover really is a short-term outlook before moving on to questions. And in relation to that, again, taking it by operating group. Macquarie Asset Management, as we've been saying, we expect, excluding the divestment of that public investments business that our base fees will be broadly in line, but we expect our net other operating income to be significantly up, and the big driver of that is the performance fees this year that we've been sharing with you.

Banking and Financial Services, ongoing growth in volumes in our loan books, our deposits and our funds on platform, always subject to market competitive dynamics impacting margins and ongoing investment in our tech platform. And in Macquarie Capital, on the transaction activity side, we expect -- we continue to expect it to be in line with last year, which was a strong year. But on the capital investing side, we're continuing to see growth in the private credit book, and now we're starting to have realizations in the equity book, and we're continuing to deploy there. And then CGM, whilst we expect the continued contribution from asset finance and financial markets, we're now guiding that we expect the commodities income to be up for FY '26. And at the corporate level, we expect the compensation ratio to be in line with historical levels. And the tax rate, we expect to be consistent with the first half of this financial year, which is at the higher end of the broad range that we typically have for our expected tax rate, and that's because of the mix of our income. So these short-term outlooks are always subject to the factors that we have shared with you previously that are noted on that page.

And I'll hand over to Sam now for questions because I want to leave time for you to hear from our Australian teams. Thank you.

Great. Thanks, Shemara. So we'll start with questions in the room, and then we'll go online. I'll start with Brendan, and we'll move across to the right. Let just get a microphone to you, Brendan. Just wait one second.

Brendan Sproules from Goldman Sachs. Just a question on the tax rate. You talked about the second half and the change in the mix of business. Just given the strong performance in commodities that you talked about in the third quarter and you've upgraded your guidance, what is some of the drivers of this mix change that's leading to the higher tax rate?

Yes. I'll let Frank answer that, our new CFO. But I would just say, commodities, it was asset finance that drove the increase in the third quarter. So the winter would impact more in the fourth quarter, but I'll let you.

Yes. So, Brendan, as you know, our tax rate is really a composition of the geographic composition of our income and also the nature of the income that we have. And as we're heading towards the end of the financial year, we thought it was prudent to give guidance to the market in relation to the tax rate being broadly in line with what we had in the first half.

I think when you take into account the broad range of activities that we have across the globe, the nature of the income that we have and obviously, the different tax regimes that we have, we just thought it made more sense right now to give that guidance to the market.

Great. We'll just go to Jon. Jon Mott.

John Mott from Barrenjoey. A question on the commodities business. You said the third quarter was very good, mainly driven by the asset finance. But the fourth quarter, you've increased the guidance up, which I think I've got to get my sorry, but up usually means about 10%. So does that include a stronger fourth quarter given the weather conditions in the U.S. and the gas trading, we've seen some pretty wide spreads across the gas prices in the U.S. over the last few weeks. So are you expecting a much better North American gas performance in the fourth quarter in that guidance?

Yes. And I'll let Simon comment because he's sitting here in the front row. But as you saw in January, we had extreme cold weather for a very short period in North America, and our teams were able to respond to that in that very contained period, partly because of the insights over the market, but partly the infrastructure footprint that we have with the pipelines and the power lines is where we benefited quite a bit.

Now that weather, it's bounced around, but it's -- the cold snap was quite short-lived, but that has driven our guidance for fourth quarter. I'll let Simon elaborate.

Sure. I think you've answered pretty well, Shemara. Sorry, I'm standing up to stand up. So you're well aware, people follow the commodity prices that the third quarter prices in the initial part of winter for gas prices in the U.S. was subdued, most of December. We really saw that spike in three weeks in January. And if you follow NYMEX or Henry Hub, we saw the price rally up to sort of mid-7s from sort of mid-3s.

Now -- but what we've seen after the three weeks is those prices now collapsed back to, I think, this morning of about $3.20. So the good news is the optionality in the platform has kicked in. We've been able to take advantage of that, but it has been reasonably short-lived, but winter is still is at play. So, that optionality does, as Shemara mentioned, revolve around our physical assets. So we've been able to capitalize on those, not only in the gas markets, but also particularly in power and the movement of power around our financial transmission rights.

Just to follow up on that. You're still seeing some extremely cold weather in the Northeast. And I think the price of some of the gas is still over $20, $30 up in the Northeast corner, I think Southern California is down to $1.80. So you're seeing some big spreads across the country. Are you able to benefit from that? Or is it just the Henry Hub coming up and down that we should be focused on?

No, obviously, you're right. locational spreads are in play at the moment. As you'd be well aware, we have about 19 pipe assets across North America and Canada. So it does allow us to participate in those location opportunities as they arise. And so we are still able to take advantage of that is, but those, I guess, Permian Basin spreads are flicking around, particularly this morning. So, yes, the opportunity still prevails, but less than what we were seeing perhaps for those three weeks in January.

I'll go to Ed just because he is next to Jon. Ed Henning.

It's Ed Henning from CLSA. Just following on, on the commodities business. Previously, you talked about moving it from the bank to the nonbank. Can you just touch on there about the ability or how you've gone so far and looking at long-dated contracts on the LNG business and the capital and willingness to use the balance sheet to grow that as it looks like that's a key area for growth in the market in the U.S. gas market and potentially your business?

Yes. You probably read that there's a couple of positions that we've taken on there. But in usual Macquarie style, it's patient adjacent growth. So we're taking on stuff that we have capacity to absorb the volatility that will come because you enter into long-term offtakes and you can have prices bounce. And we want to know that we can absorb the sort of outcomes that may happen well within the earnings capacity of CGM. So the volumes that we've taken on at this point, we think, are good amounts for us to put a toe in the water and watch what develops. And there are a couple of good projects, we think. We spent a lot of time, Simon, analyzing the sector, talking with participants, looking at long-term as well as short-term volatility. Anything you want to elaborate on there in terms of LNG?

Yes, I think that's right. And the only thing I'd add is that over the period as we've moved from bank to nonbank, we've also built out our trading team as well. So, yes, we have engaged in two long-term offtakes which still yet to go FID, but we have built out our trading team. So incrementally, we're growing our way into it. We are very aware of the projected oversupply or overhang of LNG supply up until about 2031, '32. So we're conscious of that. So, as Shemara said, we're being cautious and incremental into our staggering into this opportunity.

And I think you made a good point there about the timing for these two projects. So the impacts on us are not likely to come on for some years as well.

And just with those projects coming on and obviously growing out the trading team, does that allow you to trade more around it having the actual physical asset?

Yes, absolutely. The trading team basically gives them access to physical supply. Whilst those projects you have to go FID as they do or do not, but as they do, that allows us to start trading more actively even before they come online because we actually do forward strips and trade out the curve as we see opportunities arise. So, the physical side of it is important to us, but we've also started the trading side, both physical and financial at the moment.

And we should say the position you have across this in terms of coming into and coming out of the liquefaction facilities is what we think will actually allow us to generate superior returns on taking these offtakes.

Great. We go to Andrew. Andrew Triggs in the second row there.

Andrew Triggs from JPMorgan. The recent week or so has seen heightened exposure -- heightened interest in exposures in software within private credit businesses. Just interested to get your perspectives on exposures, both within the private credit book and also the MacCap equity book. I think the disclosure is 30% of private credit exposed in TMET, but a further breakdown of that would be useful. And then just had a follow-on question on private credit after that.

Yes, sure. And we obviously, with what's playing out in markets have been diving deeper into the exact nature. I should say we have little exposure in our asset manager, which is where the share prices of a lot of our peers have suffered, but it's not a business we're in the asset manager. So it's really, as you say, in the private credit and the private equity books. Headline, we do have 25% to 30% in SaaS businesses, but Michael Silverton is here in the front row and his team have done a deep dive into it. We obviously will keep looking. Currently, we don't see any big issues, but the percentage that's exposed to the SaaS that could be replaced by AI and particularly seats-based revenue, we think is small.

But Michael, why don't you elaborate?

Thanks, Andrew. So, clearly, we are watching this closely, and we've been focused on AI across the broader business, both on the equity side and the private credit side. You're right to say that around 25% of our book is software based. And then we have in the broader TMET space, we also have some exposures to managed services, marketplaces and government services. On the software side, we've got about 200 positions all up around -- so around 50 of the positions also in software. I think what's important to note is that we are lending against cash flow, free cash flow. So think of it sort of 4x to 8x free cash flow is what we're looking at. And in terms of the transactions that have taken place, we're also lending against value at about 30% to 40% of value that we determine.

We're clearly watching this closely because the changes -- the headlines are coming every day, and we're learning about it at the same time the market is. But we are focused on enterprise software embedded in the business. And also, it's very aligned with the sectors that we have expertise in. So if you think about insurance broking, education and the broader sort of services areas that we talk about, that's where most of our software is exposed. And I think it's very important to think about the regulatory considerations here. We -- the probabilistic models don't really work effectively in the enterprise yet. it's very important to get accurate results. And so we've been very focused on those areas that have sort of a regulatory moat. But we're looking at it very closely, and we're confident that our loss rates still hold as they have historically.

On the equity side, we've been investing in AI. So as you've seen, we've got about $5.5 billion invested. We've been realizing assets. But about 30% of our portfolio is in sort of AI or software adjacent areas. We think that's an exciting opportunity for us, but we're also looking defensively at what the new software challenges may be as well. But we feel very good about the book.

And the only thing I'd add is Andrew Cassidy is in the front row. We look at AI in every software credit or equity position we invest in. We've been doing this for some time on how obsolescence could happen. So, I think, we feel certainly in the credit book, very comfortable that we're forensically looking as we invest over sort of a 5-, 7-year period, what could play out.

This one might be for Michael as well, but there's been return to decent growth in the private credit book. I think all of that's on balance sheet. So could you just give us a status update on the JV with MAM?

Sure. So we saw a good opportunity in the year-to-date in the last quarter. So we've invested around $10 billion in the book. Good news is we've been able to preserve our spreads, find opportunity more so probably in Europe than we have in the U.S. of late.

We also, as we've mentioned, the weighted average life of these loans is sort of three years. So we've grown the book 12%. And so you can do the math. We've had repayments and sell-downs to partners of the difference. The expansion of partnerships is going well. It takes time. We can't talk about the fundraisings that are in the market, but the partnerships are growing well and expanding, and we'll continue to sell down warehouse and sell down into those entities as they raise money.

And Ben, I don't think we can say how much we've raised in each of the raisings that we're doing so far. But what we can say is that it's broadly going well. And usually, the early funds are not big ones, even though we have a multi-decade track record on the balance sheet, these are viewed as first-time funds. We've been through this over and over where people are cautious allocating. And then in the second fund, you'll typically get pickup in momentum. Anything else you want to add from that side?

We'll go to Brian next to Andrew.

Brian Johnson, MST. Probably a question for Michael as well. Michael, can we just confirm, historically, the loss rate in the private finance book is about 10 basis points over three years. So, today, am I right in thinking that you've just said that's still the right level to think about?

Thanks, Brian. The market convention, 10 basis points per annum on the book is what over the life of our investing, we've seen and the experience in the past year is consistent with that. We're under 10 basis points thus far.

And then the flip side on that, just based on Bloomberg stories, we can see there's a pretty heavy redemption cycle going for some of the very big global peers. Your private finance book in contrast from memory is actually wholesale funded on balance sheet. Are we starting to see an impact coming through on the forward funding costs for the book or not yet?

Not yet on the funding side. We do run a matched funded book. And obviously, people are responding to news headlines and making choices in terms of their investing approach. For us, we're totally focused on risk-adjusted returns, and we match fund everything. So we're looking to hold to maturity.

The only thing I would add to that is in terms of cost that we give to the operating businesses, it is what the market is at the moment. And so as Michael was saying, we're still seeing margins at the 4 to 4.50 and that's based on whatever the fund margin over the funding cost. So I think that's the important thing to note that we transfer whatever the funding cost is to the operating businesses.

So we run it basically to aim for transfer pricing of around 4.50 to pass on funding.

And working with treasury, we're always looking at ways to diversify our funding sources as well. So we've got wholesale funding. We've also been working on secured funding for certain parts of the book as well and other ways to improve the returns on the book and the risk.

And the final one, I feel we could have had this conversation down the path. Just in the first half, MacCap's kind of guidance was very second half skewed and it did rely on asset realizations. We can see some of the asset realizations coming through in the third quarter. Can we assume it's delivered? Or is there more expected between now and 31 March, which is rapidly approaching?

There's more expected. We're working hard on that and teams right now are deeply focused on those transactions across the world. We have a handful of transactions that are in the final stages of negotiation. We feel comfortable with what we've said to the market in terms of expectations, and we're encouraged by the realizations that we saw in the third quarter.

The only thing I'd mention is we're very focused on getting the best return for the risk. So we're not going to rush things for a month to all financial year next, but we're starting, Michael, to see the seasoning now of the book. So we should have better equity realization over the next while.

Go to Matt in the third row there. Thank you.

Matt Dunger from Bank of America. I just wondered if I could follow up on the MacCap question about the equity realizations, and you've previously talked to a 23% IRR hurdle on that book. So just wondering if you could give any color around how close you're tracking, how the price expectations are? Should we see -- like how comfortable are you to see an elevated period of realizations through into this fourth quarter?

Yes. And Michael, you can comment, but the -- it's lumpy, the realization. So we average out that 23%. And we've had a period where we've been investing a lot. We put another $2 billion to work in the books over the last couple of years. That's now starting to get to some realization. So, over next year, the year after, we should see some of that.

We don't see changing our guidance in terms of the realizations so far year-to-date. In one case, we saw a doubling of EBITDA, IRR is probably a bit lower than the 23% on that asset, but a good result. And on the other one, well in excess of the 23%. So we still consider that to be our target, but there's different risks in these assets. Some of them are more pref based in return and certain, and we would accept lower returns in that case and others are shorter term. The multiple of money is around 1.6x in terms of thinking about it from that perspective as well. That's cycle than we're looking at on average for the assets.

And just a follow-up. Is this the main lever for capital release for you to restart the buyback? What else are you thinking about? Obviously, commodities is a large consumer of capital in the quarter. What are you waiting for to keep up the rest of the buyback?

Yes. I think, Frank, you should comment on that, but we are looking.

As you would have said in the slides, the capital usage from the operating groups in the last quarter continued to increase, and that was despite the fact that we had the capital return from the sale of the public investments business in MAM and also the partial sale of the car loans portfolio in BFS. But despite that, we actually saw increased net usage from the operating businesses.

So, for us, it's always really a balance. What are the operating groups seeing? Are they meeting their return targets? If they are, our preference, obviously, is to give it to the operating groups to generate that return. But if we don't see those opportunities, we obviously have the buyback as an option. And we do like the flexibility of the buyback such that if we don't see those opportunities, if we do have that excess capital, which we can't see it being used over a reasonable period of time, then we can actually exercise that buyback.

If we don't have any other questions in the room for now, we've got the question on the line. So I might just go to the lines, please.

All right. Thank you. Our first question today is from Matthew Wilson from Jarden. Matthew, please go ahead with your question after beep. We've not heard from Matthew either and no further questions in the room at the moment. I will throw back.

All right. Thank you. Matt, if you want to send me a message, I can relay your question.

Are there any further questions in the room? If not, then we'll conclude the third quarter update with the Q&A. We are going to show a short video before we move to the Macquarie and ANZ section. So we'll show that video. We'll move the other tables off and our team can start getting ready to come on stage. Thank you very much.

[Presentation]

Thanks and now we'll move on to the deep dive into Australia. And while our colleagues are walking on, let me just give you an overview of, as you all know, our business started here in Australia in 1969 with three people. And it's impressive 56 years on today that we still have 36% of our income coming from this country and ANZ region. And as a proportion of world capital markets, it's pretty impressive that this region is still delivering such impressive numbers across all four of our operating businesses, which are delivering solutions to customers. We also, on this slide, you can see have nearly 50% of our staff still based here, and I'll talk about that in a moment.

But before handing over to the teams, what I wanted to do is just if you have a look at the right-hand side of this starting at the bottom with Macquarie Capital, just go through a little bit of the story of the four groups as sort of opening background. And at the bottom there with Macquarie Capital, you see in 1969 when three people started the business, that was the business we were in, the M&A advice and capital solutions business. And today, 56 years on, Tim Joyce will talk to you about this a bit, but we are still on the Dealogic table, the #1 M&A adviser by value and volume of deals. We're #1 in equities recently. We also, in ECM have a number of active relationships. We have 50% of the top 100. I don't want to steal your thunder, Tim, but the business has grown to scale and remains a leading business. But what we've also done now is gone into capital market solutions, bringing the debt and equity, as Michael Silverton was talking about $5.5 billion alongside our partners, and we're engaging globally with our teams around the world in doing that.

The next area we went into, and Craig Ross is seated next to Tim Joyce, was the financial and commodity markets, and we were a pioneer here in Australia of options markets, futures markets and FX, you're going to particularly talk about. So having developed those skills and market capabilities here, we've taken that global. It's now 25% of our operating income in CGM still comes out of Australia despite being in huge markets. And then as we went through the '70s and into the '80s, and by the way, Byron Den Hertog, who's sitting here has a couple of feature appearances in these sections, but he's going to talk about energy with Craig. But Ben Perham here as we went into the '80s, we launched the Cash Management Trust, which was helping retail savers access wholesale returns. So another innovative step. And so as we got our banking license in 1985, that capital, the multibillions we had there positioned us then to grow a branchless leading digital banking business which is award-winning today, and Ben will talk about the business he leads in there, which is the home lending, which is the biggest part of it, but we've also grown into business banking and wealth and have a long runway to go there.

And then Macquarie Asset Management, as we move to the '90s, we, together with a few others, pioneered infrastructure as an asset class in this country and are still the world-leading infrastructure manager. But in Australia, Ani Satchcroft is here and we will talk to you about how we're still cutting edge and taking the asset class to new areas for the savers whose money we're investing. And a little bit of why that business grew here was not just the investments available, but the pools of capital. So we worked with partners. You heard them on the video talking about this. We have $4.5 trillion here in pension savings, an incredible system starting in the early '90s that's 2.5x our GDP, and we're partnering with those investors to not just invest here but globally.

But what is also less known is our position in fixed income and equities. So Brett Lewthwaite will talk to you about what we do in fixed income and Ben Leung is going to talk -- Benjamin Leung is going to talk to you about what we do in systematic equities, where in Australia, we manage about $326 billion of assets. So businesses that early innovation, as you heard for all four of them, pioneering these lines and then growing them now at scale and diversifying globally.

And a couple of other things I'll mention about Australia that are greater, obviously, export-led economy. So Tim and team as well as infrastructure, digital, leading in those areas. We're partnering a lot with resources companies. You heard critical minerals is a sector we've done a lot in. We also have a banking housing sector that's growing a lot here, 6% CAGR historically, but we need a lot more housing developed here. So, for our mortgage business, a good backdrop.

But the other thing I'll mention as well as a stable, robust economy is the pool for talent. So this is no accident that we have half our people still here as we are able to attract phenomenal talent in this country and have grown our global businesses by sending Aussies out over the decades and then hiring locals and taking that same culture.

So, with that, I think I've mentioned everyone here, I will hand over to Ben, who's going to talk to you about BFS.

Well, thanks very much, Shemara, and good morning, everyone. As you know, BFS is our retail business with over 2 million customers across Australia. There are three parts to BFS, Personal Banking, Business Banking and Wealth Management. And today, I'll be focusing on personal banking.

Looking back at Macquarie's history in retail banking, you can see at least three phases where our innovations have delivered significant value to Australian consumers. As Shemara just mentioned, in 1980, we launched the Macquarie Cash Management Trust, paying Australian depositors a higher interest rate than was available from the other banks. The product was very successful with customers because they saw it provided them better value. All customers benefited from this, even customers who didn't open a CMT because the competitive pressure led to higher deposit rates for everyone. In 1993, we brought nonbank securitization to Australia, enabling the rise of the nonbank lenders.

The value to customers was dramatic with home loan rates falling by around 2%. Again, all customers benefited from this, even customers who didn't move to a nonbank lender because the competitive pressure led to lower home loan rates for everyone. More lenders in the market meant more choices for customers, and that gave rise to the mortgage broker channel, which has grown to assisting around 2/3 of Australians seeking a home loan.

We're now in our third phase of delivering value to Australian consumers with our digital banking offering that you're all familiar with. As we've said before, the growth that you're seeing today is not an overnight success. It's the result of a strategy that we embarked on in 2012, and we've been executing on deliberately and patiently. We have built a culture that is truly customer-centric, evidenced by our product constructs and our digital capabilities being noticeably different from the rest of the market. We've listed a few of our many innovations on the slide here, the most recent of which is our AI-powered digital assistant called Q.

You can see on this slide that our digital banking offering is loved by customers across the country and across all ages. Our distribution of customers broadly aligns to the Australian population by age and location. And that's not surprising because we designed our offering to be truly digital first, which means all Australians can access our offerings irrespective of where they are. Since we don't have the advantage of long established national branch networks, we had to design our products to be able to do everything digitally, and that's what we've done.

Our strong Net Promoter Scores tell us that our customers are very happy banking with us. Indeed, our Net Promoter Scores are even higher from our regional customers than our metro customers, which tells us that we're able to serve them very well.

Our customers have free access to over 23,000 ATMs across Australia because we refunded them the fees charged by the ATM operator on debit card withdrawals. We have brokers accredited and over 1,200 post codes across Australia, which gives us excellent coverage.

Looking at this overall picture, our business model innovation is delivering real value to all Australians across the whole country. This broad appeal gives us reasons to be -- to believe that we can continue to attract more customers. But we certainly don't take success for granted. It's a very competitive market and the standard of banking experiences in Australia is very high. The major banks are formidable competitors, and we're conscious that we're only 1/4 to half their size and a relative newcomer. We know that we'll need to keep working very hard to compete effectively.

Regarding our technology in BFS, you'll hear more about that later from Ashwin Sinha, BFS' Chief Digital Data and AI Officer. I'll just briefly mention that we see our approach to technology as a competitive advantage based on our architecture, the investments we've made, our cloud-native approach and our single data platform. But what's harder to see from the outside and perhaps an even stronger competitive advantage is the technology culture that we've created. We operate as a tech business as much as a bank, and we have embedded tech company ways of working to assure -- to achieve whole of business alignment through a common strategy, shared OKRs and a unified prioritization process. People who join us tell us it's quite different from what they experience elsewhere. We've been investing in our tech culture for over a decade, and we see it as a significant contributor to the outcomes that you're seeing from BFS.

I mentioned that we're a relative newcomer and the major banks have a raft of natural advantages built over hundreds of years. So we are inherently a challenger, but there are many different ways to be a challenger. And the language that we use is that we want to be a customer-obsessed game changer. That means we want our culture and our strategy to motivate a relentless focus on the customer experience. You can see that coming through in our digital experiences, which we think lead the market, evidenced by our Net Promoter Scores.

On the slide here, we're showing you a few specific proof points of our digital capabilities. For example, someone who is not yet a customer can download our mobile banking app, become a customer, open a transaction account and a savings account, receive money into those accounts, digitally provision a debit card and start spending all in a matter of a few minutes.

Our approach to the deposits market is another tangible example of our customer-centric culture and strategy. In Personal Banking, we pay a proper interest rate to all our customers, and we don't charge monthly account keeping fees. Most everyday banking products in the market pay zero interest and many charge monthly fees. Most savings products in the market require customers to meet a raft of complex conditions before you earn the advertised interest rate. The ACCC found that 71% of customers don't meet the conditions. We take a different approach. Our savings account has never had a conditional bonus rate. We simply pay the interest rate that we advertise, no hoops and no catches.

On the slide here, we're showing this visually, and it highlights that the different outcomes for customers are really quite stark. Similar to cash management in 1980, this is another example of Macquarie thinking differently and delivering customers substantially more value. More and more customers are coming around to see this clearly. So when we look at the whole market and are still relatively small market share, we believe there's opportunity to continue growing.

As you can see on the slide in the bottom left corner, we're still significantly underweight in term deposits. This slide demonstrates that customers do see superior value in our savings product as it's grown to become our largest source of deposit funding. Over a long time now, we've demonstrated our ability to fund our home loan growth with deposits, and we're confident that we can continue to do so. We have a lower proportion of wholesale funding than the rest of the market. So we also have that funding source available to us if necessary.

So turning to home loans. You see the same approach here of delivering value to customers through simpler products, more transparent interest rates and digital excellence. We are loudly pro-broker. We believe that brokers are good for customers and good for the market. And with 2/3 of customers using brokers, they seem to agree with us. We've invested heavily in technology to give customers and brokers the best experience. There are many dimensions to that, but one of them is the time it takes us to formally approve a loan application. We're considerably faster than the rest of the market. And that's important to customers because it gives them the confidence they need that they're set with the financing that they need.

The market norm is a long and drawn-out period of uncertainty and anxiety. Most lenders find that as their volumes grow, the originations capacity can't keep up, and so their approval times slow down. In contrast, we keep innovating and investing to build more capacity so that we don't compromise on the excellent customer experience and broker experience that we're now known for. We've been slowly increasing our share of new business written in the broker channel, which is now around 14% to 15% of the whole market. We're achieving above that level with some aggregators in some states, which indicates we might be able to lift that further. As you can see in the chart, over the last three years, we have moved from fifth to third ranking in our share of broker home loan applications.

We have a more conservative credit appetite than our competitors, and we've maintained that risk discipline even while we've grown strongly. You can see that clearly in our lower LVR profile, and we're showing you here two different ways to look at that. One is our composition of new business flow relative to the market and the other is our market share split across different LVR bands.

What's harder to communicate on a slide is the other aspects of our credit policy, which are conservative relative to the market. For example, in our credit assessments, we take a more conservative approach to disclose mispayments in the customers' credit bureau file. Another recent example is that we led the market in ceasing lending to trusts and companies. We first implemented transparent DTI restrictions in our credit policy in 2019, and we maintained them throughout the COVID era of ultra-low interest rates. And you can see the positive result in the slide here. Overall, our disciplined credit appetite is leading to industry-leading arrears.

The disciplined execution of our strategy is translating to strong and sustainable returns. We continue to invest in tools for process automation and customer self-service, which allows us to absorb significant volume growth with minimal incremental costs. Since August 2023, we've reduced our headcount by 24% in Personal Banking, whilst growing our home loan book by over 50%. As a result, you can see our cost-to-income ratio is improving dramatically.

We're showing you here, and this is the first time that we've disclosed this, our CTI, including profit share and corporate costs. This is our CTI for personal banking comparing to the consumer divisions of the market. We've improved our CTI over the last two years, and we compare favorably to the market. We're still a long way from the market leader, and we'll keep investing to improve our CTI as we grow. This competitive cost structure is also driving attractive returns.

Our return on equity for BFS is approximately 13%. That's our ROE for BFS on a fully allocated basis, including profit share and corporate costs and adjusting for funding from capital. Even at our current sites, our ROE is competitive with the market and comfortably above our cost of capital for the retail business.

In conclusion, we're going to keep working hard to deliver digital experiences that customers love. Australians can see that our different business model is delivering them value, higher deposit rates and competitive lending rates. So there's a credible case to believe that we can continue to grow from here. And we believe our investment in our cost structure will yield attractive returns to shareholders as we grow.

Thanks very much for your attention, and I'm now handing over to Ani. Thank you.

Thanks very much, Ben. Good morning, everyone. My name is Ani Satchcroft. I'm the Co-Head of Infrastructure Asia Pacific for Macquarie Asset Management. I've been in the industry for over 20 years and joined Macquarie in 2016.

Today, I'll begin by taking you through MAM's operations in Australia and New Zealand, our home market where we've been operating for more than 45 years. MAM in Australia and New Zealand manages over $326 billion in assets. We employ over 400 staff with a further 14,000 people employed in our portfolio companies. And we have a strong commitment to clients, serving over 130 institutional investors, including almost all of Australia's 10 largest superannuation funds and 9,000 wealth advisers. Importantly, we have generated a gross realized IRR of 20% for all real assets divestments in Australia and New Zealand since inception.

MAM's journey in Australia and New Zealand is notable for the way we've grown, building our businesses by innovating, anticipating where communities are heading and using our expertise to connect to these emerging needs with capital, then exporting this innovation and capital internationally. As you can see from the time line, the Australian team has pioneered a lot of firsts for MAM, but also a lot of world firsts, not least of all creating infrastructure as an asset class in the early '90s.

Other notable milestones include completing Australia's first toll road listing in 1994, where we developed a new and innovative method of financing infrastructure, executing what was then the world's largest airport privatization in 2002 with Sydney Airport, launching MAM's first Dynamic Bond Fund in 2017, completing Australia's first agricultural take-private with VitalHarvest in 2021, designing and implementing the world's first motor vehicle registry commercialization in 2022, and in 2024, exiting AirTrunk in what was then the world's largest data center transaction, only to be followed and amplified by our U.S. colleagues 12 months later with Aligned.

MAM in Australia and New Zealand is a leading asset manager that has been a local pioneer of growth and innovation. We have a long track record, global reach and consistent alpha generation. Our culture of investment excellence positions us to continue delivering strong, resilient outcomes and to unlock opportunities for our clients.

Over the next few minutes, I'm going to speak to you about our world-leading real assets business. Brett will discuss our fixed income business, and Benjamin will speak about systematic investments. MAM's real asset business in Australia and New Zealand is focused on unlocking opportunity by identifying sectors early, driving value creation for our clients and the community.

So let's take each of these concepts in turn. Firstly, our Australian real assets team is focused on identifying, creating and defining sectors early. We do this by anticipating the evolving needs of growing communities and matching capital to these needs. The land and motor vehicle registry commercializations are great examples of this. Communities are increasingly seeking to interact with government agencies in a digital way. Working with key stakeholders, including the government, the communities they serve, regulators and corporate customers, we have helped design, implement and fund an investment model, which has enabled these registries to modernize and provide data to the community in a more user-friendly and secure way.

Second, we have focused on growth and value creation during our investment period. After investing in AirTrunk in early 2020, we helped the company grow from a largely Australian-based hyperscale data center platform into a regional one, expanding from 5 to 11 sites, including new sites in Japan and Malaysia and additional sites in Hong Kong and Singapore, while increasing contracted capacity across the platform by over 8x. We have done this in a way which has prioritized the safety of employees and contractors, sustainability in construction and operation and strong corporate governance.

Finally, as communities grow and their needs evolve, we're scaling infrastructure to support them. For example, by bringing 0.5 gigawatt of renewable energy into construction through Ora and advancing an 8.5 gigawatt pipeline across solar, battery energy storage systems and wind to expand access to clean, reliable energy and drive long-term economic opportunity.

Let me conclude with one more case study, which brings these three themes together. In 2021, our team completed the take private of Vocus Group. We had an investment thesis that as communities continue to digitize, fiber was and would increasingly become the backbone of the digital infrastructure ecosystem, enabling data to be moved across vast distances securely, reliably and quickly. Shortly thereafter in 2002, we reaffirmed this thesis when we spun out Vocus' New Zealand subsidiary and merged it with a newly acquired asset to form 2degrees. Today, one of New Zealand's largest integrated telecommunications providers. Under MAM's ownership, both businesses have materially grown their network footprints across Australia and New Zealand. organically with large fiber builds across the North and West of Australia as well as the development of 5G cell sites in New Zealand and inorganically through the acquisition of complementary communication networks such as TPG Telecom's fixed business, a complex corporate carve-out and industrial partnership, which we completed last year as well as 2degrees itself. This has resulted in an increase of over 30,000 kilometers of fiber coverage and 1,000 tower locations, generating a 21% gross IRR to date across both Vocus and 2degrees for our underlying clients, and importantly, helping connect Australians and New Zealanders with each other and the rest of the world. And with that,

I'd like to pass to Brett.

Thank you, Ani. Good morning. My name is Brett Lewthwaite. I'm the Deputy Head of Credit and Insurance at Macquarie Asset Management. I've been at Macquarie for 23 years and lead our extensive fixed income and credit presence here in Australia.

In the financial market environment is often defined by heightened uncertainty, our approach has consistently focused on creating sustained success for our clients. That is ongoing success over a prolonged period. We have, therefore, made it a priority to understand what clients value and to build long-term partnerships grounded in trust and alignment.

Sustained success in asset management relies on delivering strong, repeatable performance year after year. This is underpinned by an investment culture built on discipline and a commitment to being the most credible asset manager and considered a highly regarded partner to our clients.

The concept of credibility is reflected in every aspect of our work from our investment philosophy, approach to detailed research and investment processes, our high-performance team culture, our innovative investment strategy range, all the way through to how we interact and connect with our clients. This focus on maximizing credibility has resulted in consistently strong performance across all of our flagship portfolios, all of which have outperformed their respective benchmarks for more than 15 years. As such, today, Macquarie is Australia's largest fixed income and credit manager with nearly $200 billion in assets under management. Our success stems from a highly experienced and very stable team with our senior leaders averaging an impressive 18 years working together. This is an uncommon level of stability and continuity in the industry. This stability, combined with sustained performance and focus on being the most credible has supported significant and continuous growth over the past two decades. We now manage investments for more than 75 pension, insurance and sovereign clients, including roughly 2/3 of the Australian superannuation funds. Many of these relationships span decades with our longest 10 partnerships averaging incredible 25 years. Our reach also extends globally with major clients across Asia and Europe.

In the Australian wealth channel, more than 7,500 financial advisers utilize our strategies. And our recent expansion into ETFs has been met with very strong interest and momentum. We are already the fastest-growing active fixed income ETF provider. Based on our performance track record, our team stability and our growth experience to date, looking ahead, we are confident that our ongoing growth trajectory will continue, particularly as we build on our considerable ambitions with relation to ETFs, extend our relationships with global insurers and continue to expand both our domestic and global presence.

Thank you. I'll now pass to Benjamin Leung.

Thank you, Brett. Good morning, everyone, and thank you for your time this morning. My name is Benjamin Leung, and I lead the Systematic Investment business in MAM. I've been Macquarie -- I've been with Macquarie for nearly 25 years and have spent the last two decades developing this capability, which I'm excited to share with you.

Our mission is to evolve the craft of investing into a digital-first world and industrialize how we generate alpha from the equity markets to deliver outcomes that are differentiated, consistent and dependable through market cycles. Sustainable alpha takes more than great stock ideas. It takes clarity to see how opportunities interact and precision in portfolio design to weather evolving market conditions. Systematic or quant is well versed to tackle this challenge by bringing discipline, transparency and repeatability to every decision that we make. And it really leverages our deep expertise with engineering principles, advanced risk tools and modern technology to help navigate the increasingly complex market.

We've been fine-tuning this process for nearly 40 years, and our longest relationship dates back to 1988. The world has changed a lot since then, and we've evolved with it. Today, we process more than 100 million pieces of data a week, which will eventually include this transcript across 27,000 securities around the world to drive returns for our investors. And the outcomes are strong. 100% of our flagship capabilities are ahead of their benchmarks across multiple time horizons and all rank in the top quartile against leading Australian and international peers. This performance and track record has cemented trust and credibility. We've been entrusted with more than $90 billion of assets under management from investors all around the world. This platform has grown by $60 billion, threefold in the last five years. And we're confident about our momentum because it's underpinned by a long history of constant innovation in talent, in design and also delivery.

For our people, this platform leverages a nimble team of experts. There are only 16 of us from diverse disciplines empowered by the best data, the best tools and most importantly, a community and a framework that actually fosters creativity and discovery. For our clients, they're looking to us for more than returns. They also value stability, transparency and stewardship. This platform allows us to embed these specifically into their product design, creating customized yet scalable and adaptive solutions that are perfect for core allocations and long-term partnerships.

And finally, we evolve with how our clients invest like ETF and innovate to demonstrate our fiduciary duty and conviction. A great example is our Australian and global active ETF launched 20 months ago. They were introduced with the lowest fixed fee in the market below passive, paired with a performance fee, which hard codes our conviction and our alignment so that Macquarie only wins when our client wins. Our conviction set a new standard for the ETF market and one that has not been followed since, disrupting both our active and our passive competitors. And this has resonated strongly with investors. The Australian vehicle was the fastest-growing active ETF. And combined, both vehicles have attracted more than $1 billion from investors. And pleasingly, if you refer to the performance, they both delivered well above their objectives. We're very confident about our capability, and we're excited about what we can deliver in the ETF space, and we're well prepared to lead in the AI-enabled future. Thank you.

I'll now hand over to Craig.

Thanks, Benjamin, and hi, everyone. I'm Craig Ross, Head of CGM for ANZ in the region and Global Head of Fixed Income and Currencies. I've been with the business now for over 30 years, having joined in 1994 on the FX desk as a graduate. I met some of you in London last year during the EMEA tour. And at that time, we focused on the FIC business within EMEA. Today, I'd like to share with you what we're doing here in CGM and FIC in ANZ.

Starting with our broader CGM business in the region. As you've heard probably many times, CGM is a diversified client-led business with a strong franchise that's been built up over 45 years. It's a business that started here in Australia in 1978. Our capabilities span across four key areas: providing capital and financing, risk management, market access and physical execution and logistics solutions. We provide these across our three business lines: commodities, financial markets and asset finance. We're active in all these areas here in ANZ, but we tailor our offering to meet the unique needs of our clients here in the region.

Now in terms of regional significance, the ANZ region contributes about 1/4 of CGM's total operating income and is important to the overall diversity of our global business. We have over 625 staff, which is again broadly 1/4 of our global headcount. Like our global business, our teams in the region bring significant diversity in skills, backgrounds and technical expertise, enabling us to deliver tailored solutions to our growing client base.

I'd also like to highlight that we have a significant representation of our core CGM central functions and capability here in the region. This includes some of our key senior leaders who are based in Sydney, our Global CFO, Uma Bhut ; and our Global COO, Lisa Sonnabend, who is sitting here in the audience with us today. Our client base in ANZ now exceeds over 440 individual clients, continuing to grow and evolve our offering alongside this client base sits at the heart of our growth strategy.

I'd like now to focus on our business footprint and some highlights here in the ANZ region. Starting with commodities. Our focus is on the key thematics in the Australian market and the niche areas where we can bring our expertise to deliver value. So markets like energy, carbon, agriculture, metals and bulks as well as end-to-end physical execution and logistics services. Byron will come up shortly to share a case study from our Australian gas, power and carbon business.

Turning to financial markets. We have a strong presence here in Australia. We've been delivering trading, hedging and financing solutions to corporates and institutions for a long time. That's across fixed income, currencies, futures, equities and credit markets. I'll talk in more depth about FIC in the next slide. So I'll start with a brief overview of our futures offering and how that has evolved into the market leader that it is today. Hill Samuel Australia, our predecessor firm, was the first merchant bank to be granted a member status to the Sydney Futures Exchange back in 1979. Fast forward almost 50 years, and our presence in the region is stronger than ever. We provide a full range of execution, clearing and financing solutions to corporate and institutional clients. And for many years, we've been ranked the #1 futures broker on the ASX. Our equity derivatives and trading business has grown from its origins in Sydney in the 1980s. It now offers a much broader set of capabilities, providing financing, market access, portfolio optimization and hedging solutions across all major markets.

And finally, looking at asset finance. The business provides specialized finance and asset management solutions across a range of industries globally. But here in Australia, we currently manage approximately AUD 1.3 billion asset-backed lending book, primarily for clients in the resources, energy and telco markets.

So moving on to FIC. We've come a long way from the Hill Samuel days of an FX -- single FX trading desk in the '70s. Hill Samuel was indeed a pioneer not only in the futures space, but also was a forerunner in the development of the foreign exchange market here in Australia. By the mid-1980s, the now named Macquarie Bank offered corporate clients 24-hour foreign exchange trading, something that we continue to do today from Sydney. A spirit of innovation and entrepreneurship has been a hallmark of the way we operate over the last 40 years, and it has enabled us to build a global presence by expanding into new markets and introducing new products to our client base.

But one thing that has not changed is our client-centric approach. This sits at the core of our strategy. We are a client-first business, and we like to grow alongside our clients. From pension funds through to SMEs, our client base is rather broad. However, our offering resonates most with two main client types, that's private capital and corporates. We continue -- with those two client types, we continue to meet their needs across risk management and financing solutions.

As the market has evolved, we've had to adapt. We've integrated our funds finance teams in 2021 and Credit Markets Group in 2023, allowing us to present a broader suite of capabilities through a simpler interface to our client base. We find ourselves now in a strong position where 25% of FIC global operating income sits in the ANZ region. And as you can see from the chart, we've continued to see steady growth here, which has been underpinned by enhanced structuring capability and a strong focus on client acquisition.

Our headcount has grown in the region over the last couple of years, reflecting our ongoing commitment to this region and the opportunities that exist to grow and evolve in the market. As we look forward, we're seeing solid growth in our financing books with good momentum in our securitization book and a strong forward pipeline. Many of you would have heard us talk about Aurora. So Macquarie Aurora is our digital trading platform. It provides clients with real-time electronic access to select CGM products and solutions for their trading, hedging and operational requirements. The platform is now rapidly evolving as we add commodity-related products such as metals, agriculture with energy to follow. Looking ahead, as we expand our products and add new clients, the outlook for Aurora is extremely exciting.

Aurora is just one part of the FIC offering. And as a client-led business, we have placed an increased focus on collaboration so that when we go and see clients, we present all of FIC. This increased collaboration is not only happening within Fit, but also across CGM, but also other parts of Macquarie, including our colleagues in MacCap, MAM and BFS. It's very important for our teams to be working alongside the bankers and asset managers within the Macquarie Group.

We will continue to evolve our product offering and focus on capturing higher-value opportunities. We pride ourselves on being solution providers, not liquidity providers. We like to get paid for our efforts and expertise. And as we look to the future, we will continue to focus on growing our share of wallet with compatible clients.

And finally, we are transforming our business by working faster, smarter and better with AI. Our goal is to reduce manual processes to increase efficiency, agility and reduce operational risk. We want to empower our sales teams to spend more time with their clients. We want to give our trading and deal management teams the tools to reduce booking friction, and this will help us scale the business in line with our aspirations. My colleague, Gaurav, who leads our transformation function is going to tell you more about how CGM is investing in AI later this morning. And with that, I thank you for your time.

I'll now pass to Byron to tell you about how we're evolving the commodities offering here in ANZ in the battery storage space. Thank you.

Thanks, Craig, and hi, everyone. I'm Byron Den Hertog, Co-Head of our EMEA, APAC Gas Power and Carbon business within our Commodities division. I've been in Macquarie for 15 years, actually 15 years this week and have nearly 25 years experience in power, energy and carbon markets, focusing on things like commodity price risk management, structured products and working capital solutions for our clients. My day-to-day focus is centered on growing our Asia Pacific footprint in these underlying commodities, a particularly exciting area as trading masks continue to open up for opportunity. The management of international energy linkage becomes more important for our clients and the energy transition obviously continues to evolve through this part of the world.

Our Australian power desk was established back in 2011. And during the last 15 years, we've been developing a well-established trading, risk management and financing capability within the Australian energy market. This deep and proven experience with multiple decades of collective team expertise means we are well placed to identify emerging opportunities and meeting the evolving needs of our clients. And back in 2011, we started with baseload power hedging contracts. And through the years, we've innovated to the highly structured multi-laid portfolio of risk management solutions that we have for our clients now.

Today, I'd like to tell you about some of the work we've been doing in flexible battery storage and how we're integrating this into our Australian energy portfolio. And this is, of course, one of the many innovative things that we're focused on in the commodities business, but it is a good example of how we're responding to emerging trends and adding solutions that complement our existing capabilities and offerings. Now all electricity markets are volatile by nature, and Australia's national electricity market is no different. We see significant price fluctuations, especially during periods of peak demand or supply shortfalls.

The rapid expansion of variable renewable energy sources, such as solar or wind, it increases the market's risk sensitivity to weather conditions, and it certainly amplifies intraday price volatility. And this is further complicated by more frequent unplanned generation outages or transmission constraints. And these, in fact, exacerbate those price swings. The rapid growth of renewables, particularly both wholesale and consumer solar is also leading to periods of oversupply and significantly more complex needs for our client portfolios, and highlights the need for more flexible energy management solutions.

Storage assets are emerging as a critical tool for market participants to navigate this heightened volatility by storing surplus renewable energy and providing flexible power, batteries enable more efficient energy management in relation to supply and demand.

Now within CGM, we've been patiently building our flexible and storage asset capability so that we can further innovate our client offerings, tailoring solutions that assist them in managing the significant intraday price and electricity load exposure that they have. Our strategy has been and continues to be about building battery portfolios without owning the physical assets. That is, we don't directly own or operate batteries within CGM. But rather, we create a virtual battery model, whereby CGM receives the associated financial outcomes, but which allows the battery asset owners to receive the fixed revenue and retain operational flexibility. This capability extends CGM's existing offerings -- it's adding diversification of new tools to deliver bespoke solutions for our clients, particularly as the energy transition continues to play out.

I'd like to wrap up by reiterating the deep experience we built in energy markets in Australia and indeed, all over the globe over the last 15-plus years. Indeed, this positions us to not only continue to grow the business here in the region, but also continue to build our franchise offerings globally. Clearly, the themes we are addressing here in Australia, volatility integration of renewables and battery capability are relevant across the globe. The infrastructure and expertise we have built here in the region is able to be replicated and scaled for targeted opportunities that we see in other markets facing similar challenges.

Thank you. And I'd like to pass you to Tim Joyce, who'll tell you about Macquarie Capital in ANZ.

Good morning. My name is Tim Joyce. I'm the Head of Macquarie Capital for Asia Pacific. I've been with the group for 21 years, and I've led the Australian business for the last nine years.

As Shemara noted earlier, Macquarie Capital's origins date back to the beginning of Macquarie Group in 1969 when the business was established to provide international standard financial advisory services to Australian businesses. Today, we are Australia's most active firm. We operate globally across M&A advisory, equity capital markets, principal investing, equities research and full-service institutional broking. Nearly 500 of our staff are based in our five locations in ANZ. And so the region represents approximately 1/3 of the overall Macquarie Capital team. Our leadership bench is deep with transaction teams led by approximately 50 directors and our executive directors having an average tenure of 22 years. Of course, integral to our success is the deep and long-standing relationships that we have with our clients. We aim to be our clients' first call for their M&A and capital markets requirements, particularly in complex situations. And as an example of this, we are currently active with 50% of the ASX 100.

Turning to some recent highlights. 2025 saw a global recovery in M&A with volumes up nearly 50%. Whilst in Australia, market activity was really -- was flat on the last 3 years. Our performance was strong with the first three quarters being the best results we've seen since the COVID boom. In 2025, we were #1 for M&A by volume and value and advised on 50% more transactions than any other firm. Across M&A, ECM and DCM this year-to-date, we've completed 60 transactions valued at $64 billion.

I'm joined today, of course, Michael Silverton, our Global Head, and cross-border activity is a priority for both of us as we continue to expand in this area, and we see it as an important growth opportunity for the business. We have a dynamic global platform and operate as a truly integrated team. For example, on the Adriatic Metals transaction with Dundee Precious Metals, we mobilized experts from across Australia, EMEA and Canada to navigate the U.K. takeover code, manage ASX and LSE stakeholders and lead critical negotiations, which led to the establishment of the merged business with an enlarged and more diversified portfolio. As you heard from Ani, Australia is an attractive investment destination, and we're active in providing global clients with access to inbound investment opportunities.

We're also active in facilitating the exploitation of Australia's capital seeking diversification through international investment opportunities across M&A, project development and equities. And in support of these efforts, we are sponsoring the Australian Superannuation Summit in the U.S. next month, along with our colleagues in MAM and in the U.S., of course.

Our ECM team has had a very strong start to the year. In what is typically a quieter period before reporting season, we've already launched five transactions and raised over $900 million in equity. This means we've been responsible for over $0.40 in every dollar raised on the ASX so far in 2026, which is a really pleasing result, of course. We're also seeing encouraging signs in the IPO market, where we are confident there is investor support for new issuance, and we are actively identifying suitable opportunities for businesses that are looking to partner with the listed market.

Our advisory and equity capital market capabilities are enhanced through our strategic Equity Solutions business, which is a joint venture with CGM. We provide share financing, stake building and convertible bond solutions for clients. Of course, our equities business is a very important part of MacCap and Kristen Edmond, who leads our team here has joined us today. Fortunately, we're seeing a distinct uplift in activity as a result of heightened market volatility and a resurgence of offshore interest in Australian equities.

We are also well aware of the market shift towards index tracking and quant strategies, and our portfolio trading desk has become a critical partner for managing complex large-scale rebalances. This is demonstrated by progress this year. Year-to-date, the team has managed more than $42 billion in combined transition and index rebalancing, which represents over 50% of all transitions in the market, reinforcing our position as the region's leading liquidity hub. Our quant research team has held the #1 ranking for over a decade, providing data-driven insights that are particularly valuable in today's market. This is the case for both our institutional and our corporate clients.

We also aim to be the leading advocate for Australian businesses offshore as they seek international capital with this effort supported by our dedicated Australian desks in every major global market, which is quite a distinguishing feature that our CEO clients regularly comment upon. We also offer Australia's largest equities conference in May each year.

Principal investing is a critical part of MacCap's strategy and value proposition. We continue to grow our principal investing capability across a range of strategies, and we currently have $1.9 billion committed. This also remains a key differentiator for us more broadly within ANZ as we look to act as a catalyst for transactions and partner with clients and generate recurring revenues for the group. Total capital deployed across debt and equity over the past decade now exceeds $5.5 billion.

Over the long term, we seek to develop capability in relation to structural themes where capital flows are large and growing. As these themes emerge, we have moved quickly to build expertise in areas such as the energy transition, digitization and more recently, resilience. We've certainly seen the benefits of this approach as we've delivered market-leading results across areas such as technology, critical minerals and infrastructure, leveraging the expertise of our globally connected platform.

Turning first to technology. We've been the most active adviser in the ANZ market and been involved in four of the six largest transactions in the sector last year. Activity is being driven by global strategics, consolidating technology and product capabilities across markets as we saw with CoStar's acquisition of Domain, where our team advised CoStar through digital connectivity in the ways in which Ani identified in her presentation and of course, the demand and opportunity presented by AI.

We're very pleased to be part of Australia's tech ecosystem, which has grown at a remarkable pace over the past decade, mirroring the global tech evolution, fostered by top-tier talent and market-leading innovators. Our venture capital team is deeply engaged with this dynamic, investing in innovative early-stage companies, partnering with founders to help build global businesses.

A couple of great examples of this. Firstly, BioCatch, a developer of AI-driven behavioral biometrics technology whose largest market is Australia. The product is being utilized by a range of financial institutions, including by, as Ben may be aware, our colleagues in BFS to collaborate real time on fraud detection. We're also invested in a business known as forward safety, and you heard about them in the earlier video presentation. This business is a leader in workplace fatality prevention technology and is widely used by our critical minerals and energy clients in high-risk settings.

Further, whilst we are supporting our clients and partners in this space, we're also embedding AI into our own business to amplify our impact as advisers and investors. We're using industry-specific AI tools to facilitate more efficient research, financial analysis and modeling and to support automation of documentation.

Critical minerals, of course, especially from an Australian perspective, remains a very important business for us and one of our strongest teams, underpinned by mostly supportive commodity prices and long-term themes of decarbonization and sovereign supply security. We continue to advise on landmark transactions in this area, including last year advising VOC Group on Mitsui's $5 billion investment in the Rhodes Ridge Iron Ore project and Northern Star on its $5 billion acquisition of De Grey Mining.

While 2025 was dominated by gold, copper and rare earths, early this year, we're seeing broader momentum, including in uranium and lithium as well as access -- sorry, businesses in these areas seeking capital through our equities business, and we expect to see elevated activity across these areas.

Finally, consistent with our long heritage, Macquarie Capital remains a preeminent infrastructure adviser globally and in ANZ. We have a strong pipeline with a focus on capital deployment across transport decarbonization, energy transition and operationally intensive value-add sectors. Recent examples include advising on the sale of Kinetic as it seeks to achieve zero emissions transport and advising Aware Super on its sale of ProTen to KKR.

Our renewables team is also a leader and innovator in structuring and arranging portfolio financing for Australian renewable energy owners, where market conditions remain favorable, thanks to strong liquidity and tight margins. However, in my view, our Edge is our integrated offering that combines strategic advice, investment opportunities with access to capital markets as well as Macquarie's balance sheet. A fantastic example of this is the partnership that Macquarie Capital has had with Envest. Our team first invested in the business in 2020 when EBITDA was only $8 million. Invest has now grown to be Australia's leading and largest private insurance distributor with EBITDA of over $300 million. Through that journey, we've acted as an early-stage growth shareholder, a sell-side adviser, a lead financier, a buy-side adviser on the acquisition of PSC and in total have deployed over $450 million in debt and equity capital. We remain a shareholder today through our Principal Finance business.

MacCap also seeks to leverage the full strength of the group to deliver for clients. For example, our team last year advised Dyno Nobel on its fertilizer divestment and introduced our colleagues in CGM to provide an offtake solution for the Perdaman urea plant, which was a critical component of achieving Dyno's transaction. Likewise, we offer clients access to significant savings on insurance products through Macquarie insurance facility within MAM, and we regularly partner with BFS to provide acquisition finance and with CGM on hedging solutions.

While our Australian base remains a competitive advantage, we believe our global reach, solutions mindset and ability to evolve as a business through cycle is what our clients value and what drives our enduring leadership in our home market and in our global sectors that retain a strong nexus to Australia. Thank you.

It's my pleasure now to hand back to Shemara. Thank you.

Everybody. That was great. And hopefully, you've seen some of the common themes there that every one of these four businesses started with Macquarie taking a very innovative step in the Australian market. And even though we've grown to scale now in all four, one of the beauties of this market is it's very competitive. We're facing strong capable competitors everywhere, and it forces us to keep being innovative as you've seen. So all four businesses continuing to push the boundaries on whether it's digital banking, asset classes for infrastructure, systematic equity, fixed income, what we're doing in commodities and global markets, energy and financial markets and then balance sheet to our advisory. And we're taking that globally for our clients from here, but also for global clients to come here. So huge thanks to all of you in terms of the operating businesses.

And so now we're going to have this team head up and bring on two of our central service groups because the other thing about Australia is it is the platform for our global business, our operating platform and all our central support comes out of this country. As I mentioned, we've been able to source great talent.

So there are two things we're going to cover now. Andrew Cassidy will talk about our risk management approach, which has again been in place since we started in 1969, a huge part of while we're innovating and being entrepreneurial, how we're able to manage risk and have discipline and have consistent earnings and earnings growth. And Byron is going to make another appearance with Andrew to talk about how the operating groups work with the risk management team. And then Nicole Sorbara, who's our Head of Corporate Operations, is going to talk about our operating platform in technology, and she will have David Tough talk about cybersecurity, cloud, et cetera, and Pier Luigi talk about what we're doing in data from her teams. And again, a couple of operating group partners. Ashwin is going to talk about how these teams work together for the BFS Digital Bank and Gaurav is going to talk about CGM. As you know, we're investing heavily in the platform there and what we're delivering together. After that, we'll have time for questions.

But for now, I'll hand over to Andrew Cassidy.

Thank you, Shemara. For those who don't know me, I'm Andrew Cassidy, the Group Chief Risk Officer. I've been in the role now for four years, and I've been in RMG, our risk management group since 2020. However, I have spent the bulk of my 22 years at Macquarie in the first line, predominantly investing the balance sheet in debt and equity in the principal finance business. And I guess I mentioned my journey because it's not unique at Macquarie, and I can see Michael Silverton here in the front row as well. We often look for opportunities to move people through their careers through the three lines of defense. We think bringing people from the business into risk provides a real deep business understanding, a business alignment, a degree of commerciality to our risk functions. And of course, moving people from risk into the business provides a more holistic and some of that deep risk expertise that we hold dear here at Macquarie.

But jumping in, I do think our long-standing risk management framework has been a key to our success and stability over many economic cycles and a constantly changing external environment, indeed, as the businesses continue to innovate and invest. Our risk management framework has been unchanged for a long period of time now, but it is something that we don't take for granted. We are continuously evolving, and we need to evolve because the markets we operate in, the countries we operate in, the products we provide to clients and customers change. And so we need to meet the needs of the businesses, the stakeholders and the communities in which we operate.

I thought I'd start with this presentation on the left-hand side there, some of our core principles for risk management. And these really we've been with us right from the start 56 years ago. Firstly, all staff have a role in managing risk from the most senior to the most junior person in this organization, whether you're middle office, front office or back office, everybody is accountable for risk management and everybody is accountable for fostering a strong risk culture.

Really, really importantly, ownership of risk at the business level, and this has been one of our core principles since day dot. Group heads own the risk that they generate. They're responsible for identifying that risk. They're responsible for monitoring that risk. They're responsible for assessing and reporting on that risk. We don't outsource risk management at Macquarie.

We're really focused on worst-case outcomes. This comes through in how we think about downside scenarios. This comes through in how seriously we take our stress testing capability. An example is in our market risk framework. We focus less on recent outcomes driving statistical models. We like to look at long-term movements in prices and commodities and see where correlations break down, look at extreme moves and try and manage our business on the back of those.

And then finally, independent sign-off from the risk management group from my group. People need to involve RMG early in whether you're looking at a new business, whether you're looking at a new product, a new technology provider a new supplier. RMG needs to sign off independently on any new business or product and have a view on risk return. And we, in RMG, invest in capability experience across our staff to ensure we're bringing a different perspective, a more holistic perspective to those conversations.

And finally, before I finish this slide, now replicated by lots of our peers, but we've had a long-standing three lines of defense model. And I will call out just at the bottom there, Line 3, who not only provide a risk-based assurance over our central service groups and our businesses, but they also provide assurance over the risk management group and our risk management frameworks more broadly.

I thought I'd try and bring to life some of the principles that we live and breathe from a risk management perspective on a day-to-day basis. Firstly, independent centralized risk management is core to what we do. We apply the same level of rigor to how we assess risk, monitor risk and report on risk across CGM, across MAM, across BFS here in Australia and across Macquarie Capital. And I think that's important because, therefore, I guess that gives you confidence that when we allocate capital across those four businesses, we're doing that with a degree of consistency and a risk-based risk-adjusted approach that's consistent across all the businesses.

I will call out continuous assessment. As I mentioned earlier, our markets change, our products change, our regulatory obligations and expectations change constantly. So the businesses are accountable for continually assessing that. RMG plays a really strong role in that and tries to bring some of that holistic perspective. We have what's called risk and control self-assessments across the organization, which the business owns. And that means for every product that we offer at Macquarie on a semi-regular basis, people are sitting down and really assessing how that -- how the risk and control landscape might have changed for that product and what that might mean for us from a risk basis.

Over on the right-hand side, I'd call out how we operationalize some of these things, setting and monitoring risk appetite. This is a really important role that the Macquarie Group and Macquarie Bank boards in ensuring that our top-down risk appetite links with the business strategies. And the Board has a really important role of working with management to ensure that we're comfortable with the total amount of a particular country risk we might take, for example, sector concentration that we're happy with as another example.

Stress testing and capital adequacy. I'll call this out again. As I said, we are really focused on downside scenarios, really focused on our stress testing We, as an organization, want to ensure that we remain viable in any extreme but plausible scenario. And that links really tightly then to how we think about capital funding and liquidity to ensure that we can operate through many cycles.

I thought also to do a quick deep dive on risk culture. It is core to everything we do. It's the foundation of how staff behave, make decisions and approach work every day. Indeed, it guides how we treat our customers and clients, how we conduct ourselves in markets we operate in, how we engage with our important regulators, and of course, how we treat each other. We're all accountable for fostering that strong risk culture. And importantly, we like to see it lived and breathed on a day-to-day basis, opportunity, accountability, integrity. We talked talk a lot about that accountability concept. We're all accountable for risk. We don't outsource risk, and we like to see things from cradle to grave, in particular, when things go wrong and things will go wrong.

We've got a risk culture framework that talks to how we reflect, set, promote and then monitor our risk culture. We -- the code of conduct plays a really important role in how we set that risk conduct -- sorry, that risk culture. We monitor through qualitative and quantitative indicators. We reflect -- we understand that things evolve, expectations evolve. And as I said, things do go wrong, and it's important how we respond to that, how we reflect on that as an organization and ensure that we're thinking holistically with how we remediate issues when they occur.

I'd also reference that we've had a long-standing performance-based remuneration framework and a consequence management framework, which we think structurally underpins some of these really important components to our risk culture. And you will have seen that we provided more detail recently in some of our reporting disclosures around our CPS 5.11 framework.

A bit quick deep dive on the group or specifically line two. Firstly, we're structured by risk type. So we have credit professionals. We have market risk professionals. We're structured through our nonfinancial risk disciplines. And then secondly, we are global, which is really important. I want people in my group that have deep experience. We have people who've been doing commodities credit for 25 years at Macquarie. And before that, they were doing that for our oil majors as an example. So these people are really experienced. And when they engage with the business, they're doing that from both a product and business context. They're also doing that from a market context. I want them on the ground alongside the businesses because that's where the businesses are generating risk, and I want them alongside the business assessing that risk.

We have been investing in RMG. So I think when we spoke about the group in 2019, we were close to 900 staff at the time. Today, we are 1,200 staff. Some of that growth will reflect necessary growth as the businesses have grown, more clients, more products, more markets, more counterparties. Some of that growth indeed has reflected our focus on nonfinancial risk and regulatory and compliance over the last number of years as we really look to uplift some of the capability we have in RMG and some of the frameworks that underpin our nonfinancial risk management.

One statistic I thought was useful for this group, maybe to bring sort of some of that evolution and maturity to life. When we last spoke to you about RMG, there were two to three approvers below the head of credit that could approve large investment-grade credit. deals as an example. And most of those approvals were based in Sydney. Today, we have 9 to 10 of those approvers that approve large investment-grade credit deals and the bulk of those approvals now are based in our regions. They're in Singapore. They're in Houston. They're in New York. They're in London, they're in Dublin. They're sitting alongside our businesses engaging in those high-quality risk conversations.

What I also wanted to do, and I thought, as Shemara said, I'd steal Byron because I heard he was speaking earlier, is try and bring some of these more esoteric concepts to life with a real-life example. Before I do, and I'll invite Byron up to the stage, what we do have as a -- what we do think about from a risk perspective when we're engaging in business and transaction activity, you can see there some of the material risk that we typically generate as an organization.

I'd comment that on the left-hand side, we really have had a long track record of how we manage financial risk as an organization. All our four businesses take credit and equity risk. And we have really capable risk [ SMEs ] in RMG that understand how to think about that risk and understand the businesses. And indeed, the businesses have been doing this for a long period of time and have a really strong track record of owning and being accountable for that risk. And we saw Ben earlier talk as an example of how passionate the BFS business is around how they think about their credit risk and the processes that underpin that.

We're very deliberate with where we take market risk. We will have spoken to you previously. We don't take market risk everywhere and across all our businesses. We're very focused when we do that, that we have an edge, and we're doing that on the back of a track record and deep experience in those markets.

And then on the right-hand side, some of our really important nonfinancial risks. And as I said, many of these, we have been investing in operational risk, in particular. Financial crime is a risk type that has seen lots of evolution over the last number of years, in particular, in the sanction space, and we need to remain really agile as an example, both in the first line and the second line as how do we think about our sanctions risk across the organization.

Regulatory and conduct risk is really important. We are a home -- we're an Australian regulated institution. And so we take our obligations here incredibly importantly, and we also need to think about what our obligations are in the markets in which we operate. And then we've talked a lot about the integrity component of our opportunity, accountability and integrity, which just heightens the focus we have as a risk function, and I know the businesses have on our environmental and social risk. And we do consider that as part of every transaction.

But with that, Byron, I thought you might talk through an example, and I can give some context to that as you go.

Thanks, Andrew. And given our global capabilities in power risk and related energy complex, that really means that Japan's power market is an active focus area of growth for CGM. Indeed, Dan Vizel, our CGM Regional Head of Asia, touched on this in an operational briefing a couple of years ago. If we think about Japan, it's a significant consumer of power given its population and industrial base. But most sources of power generation rely on imported fuels. And these fuels can be things such as gas linked to international benchmarks such as Henry Hub or the Japan Korea Marker or JKM as known or various oil indices. And often, that can mean the consumers of power or indeed producers of power are exposed to electricity price risk that is directly linked to international fuel prices and the associated volatility.

So tapping into our breadth of commodity capabilities, CGM is well positioned to help large consumers in Japan, utilities and other Japanese clients convert fuel price risk into delivered fixed price power and help them manage either revenues or costs given -- depending on the circumstances.

Now often this will entail a lower utilization of market risk with hedges placed on various exchanges. However, there are several other risk elements that these -- that the business will need to work through with our key internal partner as we assess those client opportunities. So our -- in reality, our collaboration with the risk management group on the ground and in those major centers is essential to enable us to assess and manage these risks.

Thanks, Byron. So no, actually, really good example. And I try to think about that in the context of maybe a life cycle of a transaction. You have the sort of the beginning of a transaction or a new business, you have before you're going to trade, you have execution and then post trade. So firstly, the new product and business approval, for example, if we were looking to go into a new business providing risk management activity to clients in Japan, first thing we would look for, which is, again, a good example of is that patient adjacent growth. Does the team have expertise? Does the team have capability in providing risk management services for these types of commodities. And as Byron said, that's something they've been doing here in Australia and in other parts of the globe for a long period of time.

We have business in Japan. So we have capability there. We export in some capability when we start those new businesses. We look to hire external expertise on the ground, and then we look to leverage our existing operations, which is certainly what we did when Byron started this business. And that's all wrapped up in how we think about our new product and business approval.

Pre-trade, Byron said, we're really focused on our -- on credit -- taking credit risk here. So we work with the business ahead of the trade to understand the types of counterparties that they want to trade with the limit framework that we're happy to think about for those counterparties. We're involved -- we own the rating process, for example, in Line 2, and so that will determine how much capital we hold behind those counterparties. And then we think about the stress testing scenarios that we're going to run over those counterparties.

AML obligations. So as you onboard the know your client, we're an Australian designated business group. So we need to think about both our Australian AML obligations as we're offering these services to Japanese clients, but of course, the local financial crime regulations as we do that.

As you move into trade execution, as an example, Byron said that they're typically very focused on credit risk, which I guess that's sort of consistent with we don't -- where we take market risk, we want that to be really deliberate, and we typically do that in markets that we have been around for a long period of time, and we feel like we do have an edge to be able to take that market risk. So to the extent that we're left with any residual market risk from these activities, we need to ensure that we've hedged that market risk out with exchanges that we're managing any capital and liquidity implications that might come from that hedging process.

And then post-trade is really about how we monitor and report on those counterparties. And that would feed up to the reporting that we get at senior management and then ultimately to the Board around has this generated a new shape of country risk profile, for example, because we're growing in Japan, is it creating a new sector concentration for us because we're predominantly, as an example, dealing with utilities in the Japanese market as one example. So these are all context that certainly, Line 1 will own that identification, we'll own that monitoring, we'll own that reporting, but we'll be involved every step of the way from a risk perspective.

Have I missed anything there, Byron?

No, I think the only thing I'd add is that, obviously, when it comes to physical commodity risk, understanding and appreciation of the operational risk aspects of that to make sure we have the teams, the procedures, the policies in place to be able to make sure that we can deliver where we need to. And indeed, we can react to sudden market changes as they may come.

Thank you, Byron. You can get out of jail now. And I'll -- you can definitely get out of jail before this slide. So I wanted to talk about some of our recent learnings from regulatory matters.

Certainly, RMG and through its ongoing partnership across Macquarie, we're really focused on reflection and learnings as things do and will go wrong across the organization. It's really important from a risk perspective that we're not just narrow in how we think about the identification and remediation of those issues. And we have -- you've seen recently, and it was up on the regulatory slide earlier that Shemara had up, we've had some regulatory issues, in particular here in Australia, whether it's our new license conditions as part of our MBL Australian Financial Services license, which relates to our futures business in CGM or some of the misreporting we've had in the Macquarie Equities business here in Australia.

These are issues we take incredibly seriously. And we need to ensure that when we remediate those issues, we're thinking strategically, we're thinking holistically. We're not just fixing that report, but we're thinking about what other reports look like that. And we're putting the right preventative and detective control framework around it. But I guess from a CRO's perspective, and I know from the Executive Committee and Board, what incredibly important is we don't just fix the problem at hand. We apply those broader learnings across the organization. And that's one of the things we've really reflected on of late. Are we going deep enough with how we think about our root cause and where else something might occur in an organization, really strengthening the -- our clarity and transparency of risk across the life cycle of a trade. And so as I talked about the life cycle of a trade earlier, it may be that there are some controls that COG own. There may be some controls that FPE own. Indeed, there may be some controls that I own. And so ensuring we've got transparency and clarity over that end-to-end process is increasingly important for global businesses like ourselves.

And then lastly, really proactively engaging with our regulators. Regulators' expectations rightly change over time. And so we want to really try and understand those expectations. We want to really understand our regulatory perspectives so that we can be really proactive with how we're thinking about managing obligations, how we're thinking about our risk and control frameworks, how we're thinking about ensuring that our businesses and products are fit for purpose.

And then I guess, finally, looking ahead, you talk to any risk professional. And look, they are just absolutely passionate about tech and the opportunity that AI brings. They want to be using the latest tools. They want to be incorporating these tools into how they think about assessing risk and how they assure risk. Tech, digital AI is incredibly important for ensuring that we have a future-proof risk platform for the future.

And I guess now is a really good segue to hand over to Nicole and the team to talk a little bit about what we're doing that from -- what we're doing on data and AI from an enterprise-wide perspective and then with some really interesting case studies across each of the businesses.

Thanks, Andrew, and good morning, everyone. Today, I will provide you with an update on the corporate operations group with a particular focus on technology, data and AI.

COG is a global and diverse team with deep expertise in technology, data, AI, operations, operational resilience, corporate real estate and procurement, in deep partnerships with all groups. We have built and we continue to invest in a platform for growth with high integrity of data at source, a focus on front-to-back automation, leveraging AI and providing all groups with the benefits of a scalable platform. Now this is, of course, enabled by our people and by their deep skills, mindsets, behaviors and culture. The main takeaway from today's presentation is we have built a platform for growth.

Since I last presented five years ago in 2021, we have been investing considerably. We've been building scalable platforms and services across the group. We've hired deep expertise. We've invested in our people. We have matured our capabilities in data and AI. And we've also partnered with each group to deliver significant programs.

Now I'm not going to call out anything on this slide in a -- from a tech data and AI perspective because we are about to do a deeper dive. But I do want to call out the significant achievement by the COG team of delivering the Sydney Metro Martin Place precinct, and we sit here today in 1 Elizabeth Street. So as you're aware, this was our largest ever balance sheet undertaking, a six -- over six-year period, we have delivered a fantastic outcome for the city of Sydney, but also for our people, delivering them a state-of-the-art global headquarters.

Now you can see on the right-hand side of the page here, all of our programs of work are aligned and they're prioritized according to delivering three outcomes around improving quality, improving velocity and scalability. Now while we saw a material increase in the overall technology spend across the group, reflecting an investment in core systems, building new business capabilities and also regulatory programs, costs have stabilized at $2.3 billion. Within COG itself, we generate material efficiencies each year, which we reinvest into improving our services. Each year, a growing proportion of our spend is on change or transformational activity. versus business as usual activity.

I now want to focus on the right-hand side of the page. And as I mentioned, we provide the common foundations being the platforms and the services that are leveraged by all groups across Macquarie. And having consistency at the core is really important. Now these are highly secure, resilient, scalable, available and automated. Our business aligned teams are embedded within each group. They work in partnership with each group to leverage these common foundations, and they deliver differentiated platforms and services for their customers. And a key element of this is ensuring we have high integrity of data at source.

I'm shortly going to hand over to David Tough, who is our Chief Technology Officer. And he will take us through how we embed security in the platform, which reduces risk, but it also enables speed. He's also going to take us through our cloud-based infrastructure. We were an early mover to the cloud over a decade ago. And this means we have a very modern, resilient, agile and scalable platform.

Pier Luigi Culazzo, who is our Chief Data and AI Officer, he's going to take us through the journey we've been on to improve our data governance and also how we're building out and we think about our data platform ecosystem. This underpins our AI platform ecosystem and then leveraging the foundations that I've spoken about means we are enabling the entire organization to capture the benefits of automation and AI.

So bringing this to life, we're going to then hear from two of our business partners. So, Ashwin Sinha, the Chief Digital Data AI Officer in BFS; and Gaurav Singh, the Head of Transformation in CGM. And they're going to take us through the business outcomes they're achieving by leveraging our platform.

So I'll now hand over to David.

Thank you, Nicole. Good morning, everyone. My name is David Tough. I'm the Chief Technology Officer, and I've been at Macquarie for the last nine years.

Our focus on cybersecurity is on strong embedded security controls that let our teams move faster and with confidence. And that is what we've been building into the Macquarie platform. This is showing up in many outcomes, including 100% of our assets protected against advanced threats and no reportable cyber incidents in 2025. We've invested heavily in our people with over 7,500 hours of capability uplift, and our teams now sit in the top 3% globally for phishing. We have reduced fragility across our enterprise stack with a 50% reduction in technology obsolescence. And for more than a year, 100% of our server assets have been protected against very high vulnerabilities.

Let me draw out some of the highlights on the right-hand side. We've embedded multifactor authentication, materially increased our third-party cyber risk controls and deployed AI-driven e-mail data loss prevention, which is closing key attack vectors across the enterprise. In addition, AI-driven controls are reducing manual effort and improving detection and speed. The impact of this is fewer disruptions, lower operational risk and more freedom for product and delivery teams to innovate. Security is built in. The impact of this is fewer operational disruptions, lower operational risk, and we'll continue to strengthen this core as we modernize so the organization can move faster and with trust.

With that foundation in place, let's move to see how this supports our platform scale up. Over the past several years, we have continued to mature our technology foundations to ensure Macquarie is positioned for future growth. As a result, our cloud-based core systems provide the agility and scalability required to adopt market-leading capabilities at pace and continue to meet our high standards for risk management and resilience. Since 2021, we've seen a fivefold increase in cloud storage, and we've doubled our production applications running on the cloud. We've exited seven global data centers, contributing to a 20% reduction in physical data center costs, lowering our technical obsolescence and operational risk. About 91% of our applications currently run on cloud and SaaS, and we've achieved a 750% uplift in critical applications running natively on the cloud.

This environment is enabling faster and safer adoption of new technologies across the group. Last year, we onboarded 85 new cloud services, and our governance and security frameworks mean we can deploy new A models within hours of release. This gives our business access to world-cloud capabilities quickly while maintaining the controls expected of a global financial institution. You can see the impact of this investment through our businesses. Group Treasury is leveraging cloud-based compute to accelerate capital management calculations and reporting. CGM's modernized trading and risk platform is using public cloud for elastic cost-efficient scalability. MAM is embedding AI to deliver personalized and efficient customer and client experiences. In addition, a major milestone was reached last year with the closure of our largest data center, moving a significant share of our remaining on-premise workloads to cloud, reducing operational risk and removing legacy infrastructure. Taken together, these investments put Macquarie on a strong footing to continue to scale, innovate and respond to market opportunities with greater speed and confidence.

I'll now hand over to Pier Luigi.

Thank you, David. Good afternoon, everyone. My name is Pier Luigi Culazzo. I'm the Group Chief Data and AI Officer at Macquarie, being with the firm for just over two years.

We are very aware that market-leading use of AI requires two things: mature data foundation and modern technology. To capture the benefit of AI, robust data governance and the strategic data platform architecture are essential. Over the last two years, we made considerable progress improving data integrity and reducing risk. We've implemented enterprise data governance tooling to build oversight capability and support compliance across the organization. We leveraged two strategic platform partners, AWS and Google, providing scalable cloud services and consistent data controls.

Key investments include data platform with scalable cloud infrastructure, data governance and classification tools and data exchange capabilities, enabling governed data products to be published and consumed securely across Macquarie. In summary, this robust foundation and our long-term investment in public cloud enable us to deliver the AI platform ecosystem for the group.

We are partnering with our businesses to increase competitiveness and create disruption in an accelerating market. Each part of Macquarie requires leading AI capabilities to maintain competitive advantage, maximize productivity and leverage data for decision-making. We are transitioning from experimentation towards demonstrating high-value use cases with business impact and being deliberate in how we apply AI across our ecosystem and existing processes.

I would like to focus on our fundamental approach to optimize the process first, then apply automation where appropriate and use AI for remaining analytical and decision-making tasks. We have enabled foundational AI services for everyone, as you heard from our colleagues before, general AI assistance, intelligent analytics and embedded AI, plus vertical services tailored to specific business needs. Very importantly, we established responsible AI practices and strong governance.

Recognizing AI is a huge opportunity, but we are very serious about using it safely and ethically through robust framework and key partnership. The focus is to do more things faster and better, challenging processes, eliminating operational overhead and using AI sensibly where there is business impact in growth, capacity creation, cost optimization and improved scalability.

Measuring business impact from AI can be challenging, but we are seeing tangible results from all the groups. CGM is automating trader analysis. BFS is delivering real-time consumer insight and next-generation digital experiences. MEA is acceleration research with advanced AI tools, and MAM is doubling down on productivity leveraging AI. BFS' CGM will now take us through some specific use cases demonstrating this approach and practice. That's it from me. I now hand over to my colleague, Ashwin Sinha from BFS.

Thanks, Pier. Good morning, everyone. At BFS, we have been focused on building safer, better and easier banking experience for all Australians. We have been deliberate about how our digital, data and AI capabilities strengthen our retail franchise in terms of customer outcomes, risk discipline and operating leverage. I'm Ashwin Sinha, and I've been at Macquarie Group for the last seven years, leading the data and AI transformation at BFS. Today, I'm here with COG colleagues to share with you how we are building the bank of future, leveraging the core capabilities that Pier, Nicole and David spoke about.

Our progress till date rests on interconnected foundations across culture, technology platforms and data and AI. It starts with culture. As Ben said, we operate as a technology company, which means outcome for technology initiatives is deeply embedded in business, and we operate as one team, not as two separate teams. We were the first organization in Australia to roll out Gemini Enterprise to all our staff, and we backed that with extensive training of all our staff in prompt engineering and generative AI. 96% of BFS leaders are certified in generative AI. And this culture is backed by our modern technology platforms. We are 99% on cloud and soon to be 100%. But we have not done this as a lift and shift exercise. We have simplified, rearchitected and moved to cloud-native platforms, as David spoke about. This means we are able to provide our clients a level of resilience, which is very different to rest of the industry, and it increases the pace of delivery, thereby lowering the marginal cost as we scale.

And finally, data and AI is the fuel for all of this. We are one of the few banks globally to operate a single data platform. We have eliminated 90% manual adjustment in the last two years, and we run 50 artificial intelligence solutions in production to deliver customer outcomes on a day-to-day basis. That is agility of a start-up with the discipline and scale of a large financial services organization.

Now let me take you through what this means in practice on a day-to-day basis. First, reliability. Reliability is our #1 feature, and we measure reliability as how customers experience banking, not as a system uptime. And while rest of the industry excludes planned outages from their availability metrics, we have gone one step forward, and we do not have any planned outages. We are an always-on bank. This discipline and a dedicated reliability engineering team means we are able to achieve an availability metrics of 99.95%. That equates to 4 hours and 22 minutes of downtime in an entire year.

To put that in perspective, last quarter, when we moved our API gateway to a PGX, most of the other organizations would have experienced minimum a full weekend of outage and the associated customer impact. For us, we had zero impact last quarter, and the total downtime was only 24 minutes. That is reliability by design, and it compounds customer trust over time. These same foundations have allowed us to reimagine customer service and experience.

Let me introduce you to Q, our AI-powered customer service agent. What started as an idea 12 months ago is now a sophisticated solution in production, delivering personalized support 24/7 to all our customers. And we have been able to do this so rapidly because of the cloud-native AI capabilities and because we designed the control and monitoring architecture from day one, and we did not retrofit it. This means we are putting AI safely in the hands of our customers, and we are being responsible about it.

It has delivered impact on three strategic fronts. First, an iconic customer experience; second, sustainable scale; and finally, an operating leverage by freeing our highly trained staff to focus on more human-centric complex tasks. We continue to expand capabilities of Q for all our customers. And finally, reliability -- sorry, client protection. We decided several years ago to move away from SMS-based verification to our own Macquarie Authenticator to provide our customers with a real-time and secured way of approving customer transactions. Today, 95% of customer transactions are approved using Macquarie Authenticator that require multifactor authentication. Behind the scenes, the AI engines are continuously at work. We use a technology called behavioral biometrics. Tim spoke about BioCatch. That is the technology which we are using here. And that is able to understand how a customer swipes, types or holds the phone so that we can distinguish a genuine customer from a bot, a fraudster or when the customer may be acting under duress.

Now the results have been clear and measurable from this. We have reduced client losses by 55% over the last two years. We have reduced false positives across AML and fraud by more than 80% in the last three years, while our deposits grew by 50%. Another great example of how we are improving the risk discipline while maintaining customer or delivering customer outcomes and creating operating leverage for our staff to focus on more reliable threats and looking at those. In conclusion, I would like to say digital and AI are no more just initiatives at BFS. It is about -- it is what drives how we scale safely, protect our clients and build trust with our customers. And we are doing this consistently and with a very clear line of sight towards customer value and shareholder value.

That's all from me. I'll hand over to Gaurav Singh from CGM.

Thanks, Ashwin. A few long faces, so I'll try and be brief. Hi, I'm Gaurav Singh. I head transformation at CGM, which means I look after all our data technology investments and outcomes. I've been with Macquarie for 20 years, leading engineering, operations and large-scale change programs globally.

I want to build on what Nicole shared and talk briefly about CGM's investment in technology and data, what we've achieved through that focus and how it positions the business for the future. CGM operates in 20 markets globally and has a substantial data and technology footprint. Now scale creates significant opportunity, but requires a deliberate and disciplined investment approach, a consistent operating model, getting data right at source and an infrastructure that scales.

At the core of every investment decision is a simple framework. We ask ourselves three questions. Does it reduce risk? Does it enable growth? Does it drive efficiency of scale. By applying these three principles, we ensure our investments are targeted, aligned to business outcomes and focused on where we need to be in the long term. From a risk management perspective, our initial focus has been on automating and embedding controls and improving our detection systems, shifting from a reactive model to one that prevents issues before they occur.

We've laid strong foundations for investments in our strategic data platform, focusing on end-to-end completeness and accuracy of our onboarded data sets. This has led to some tangible outcomes that you can see on the screen. We've eliminated over 90% manual adjustments across all our financial regulatory reporting. And specific to this domain, we've had two clean, independent and external assurances, a strong signal that our control environment is maturing.

For a trading business like CGM, we need to respond quickly to changing market conditions, which makes system stability and scalability essential. We were the early adopters of the cloud movement, and now we've migrated our entire trading and risk infrastructure onto the cloud platform. This elasticity helps our systems match the different demands of our trading desks everywhere around the globe. This means we're available in all the regions all the time. But more importantly, we are scaling up and down, which optimizes our cost base and our infrastructure cost. Through test automation, we're seeing faster -- 50% faster deployment times and 65% reduction in change incidents, predictable -- improving our predictability of our systems and time to market is being reduced for our outcomes. Looking ahead, CGM continues to invest across data and emerging technologies with a commercial business-led approach reflective of our entrepreneurial culture.

We've anchored our regulatory remediation responses that Andrew touched upon strategically. We are onboarding our order and trade data sets onto our data platform, which enforces completeness and accuracy by design. This helps respond not only to our regulatory obligations in a robust way, but leverages data as a strategic asset for origination and pricing signals and data-led commercial decision-making.

We're starting to deploy AI use cases, which you can see on the slide up there across CGM. Around 70% of our developers are using AI to accelerate delivery. An application we recently developed would normally have taken us four to six months. We went from proof of concept to production in under a month. Today, we have 20 such use cases being deployed and many more in the pipeline. But what's encouraging is it's across the entire CGM value chain from trading and risk optimization to control automation and finally, converting processes to agent.

So, in closing, the investments we made have positioned CGM with a resilient and scalable foundation. Our disciplined approach to technology investment, our focus on high-quality data, adoption of cloud and AI enable us to reduce risk, seek out efficiencies and scale opportunities, which are critical to CGM's grow and evolve strategy. Thank you.

As you heard earlier from the operating businesses, innovation have been key to getting our businesses started and also allowing them to grow in a competitive world. But what we want is not just growth but disciplined growth. And as you can see, our risk management platform and our technology platform are key to delivering that. And as Andrew was saying, in terms of risk management, we get the business to be the first line of owning the risk in terms of looking for how they can drive patient adjacent growth from their deep expertise and insights, but having the second and third line has been critical in terms of really expert people bringing independent review and challenge and constantly evolving as the external environment changes, and we need to adapt and also having our capabilities in technology and data and at the moment, AI as well to help support this growth. that's happening and partnering with the business has been key.

So thank you all as well for giving us a couple of hours of your time to get a deeper dive into our businesses. We'll take questions now. And I think, Sam, we missed Matt Wilson at the end of the broader questions, but we also have to take.

We'll start with questions on the line, and we'll go back to the room to the extent there are questions. So if I can get Matt on the line, so we'll have one from the third quarter update, I think.

That's good. And we're worried about AI.

Exactly.

Following the Risk Management Group presentation, could we get Andrew Cassidy to address the questions at the beginning of the presentation on Macquarie's exposure to SaaS equity and debt through his risk management lens and scenario analysis approach.

Yes, good idea.

Yes. Thank you, Matt. Look, the first thing I will say, and Shemara mentioned this, it's obviously been topical in the press for the last couple of -- last week or so. We've been very focused on AI, both as an opportunity from a risk perspective, but of course, defensively around how that might impact the business models of all -- across all our businesses, in particular, as we originate new credit and new equity from the Principal Finance business and then other parts of the equity investing business in Macquarie Capital.

I think it was called out that, for example, in Principal Finance, we have about 25% of that portfolio in software. The types of questions we ask ourselves from a Line 2 perspective is what's the criticality of the software that's been provided? How many features is that software required to be able to deliver for a client? How critical and how much proprietary data is associated with that software as examples. So we think through the business model and the susceptibility of those risks on a business model-by-business model perspective.

But then, of course, we step back importantly, I guess, from a stress testing and a concentration perspective, and we look at both the historical loss rates, but of course, we then try and stress what has happened in sectors that have been disrupted before and apply that type of lens to concentrations that may emerge across both our credit and equity books.

And so as part of that stress testing process, we will look at different components of our credit book and our equity book, different sectors, different products. We will stress those in a more severe fashion than we've ever seen the historical data generate. We'll look at where sectors, as I said, have been disrupted and try and apply that lens and then think about that holistically across the organization, how does that then impact our capital settings, our funding settings and importantly, the profitability of each business.

And I think Shemara spoke about before, we only really want to ever risk the earnings associated with a particular business. And so we look at both the earnings of, say, a Principal Finance business, we look at how much ECL that they might have already provided. We look at how much an initial issue discount that exists across their book. And then we look at what the NIM is on the rest of the book that, for example, is not software attached, and then we run that to ensure that, that concentration doesn't impact the underlying earnings of the Principal Finance business and the broader Macquarie Capital business in that case.

And Andrew, I was briefly also going to say, Michael mentioned this that we do cash flow lending instead of ARR lending. So we've got real cash flows, and we look at the resilience of those cash flows in terms of the specialist expertise that they're providing for the regulatory environment or provide some barriers around the resilience of that cash flow as AI comes in. So there's a bunch of things having looked at some of these with your team that the features that we've made sure we enforce to make sure we get the best quality lending. Plus also the other thing I'd say is -- sorry, Matt, you go.

No, no, you go.

I was just going to say our book is not that big, but we are able to pick the eyes out of areas in which we have deep expertise and confidence and get really good return for the risk because it's a pretty small book all up, so we can pick the eyes out of best credits.

That's very comprehensive. If I could then just squeeze in one more question to Ben. Your deposit offering is compelling and clearly market-leading. We should all have a transaction account paying 2.25% and a savings account paying 4.5% Macquarie. While this strategy has supported growth in returns, is there another longer-term strategic aspiration that this positioning is actually pursuing?

Well, thanks, Matt, and thanks for being a customer and for the advocacy. I mean, look, we think that over the long term, that our savings book is going to be a big source of growth. But I've mentioned when we showed the market that there's a number of areas where we're still quite a small market share player. And so I think there's a range of things that can play out there.

I mentioned the term deposit market where we're underweight particularly. And we still see strong growth in our savings product because as you've highlighted, it's really compelling value for shareholders. I'm not sure I'm quite addressing the question that you had around something else that's going on.

Well, I'm just thinking more broadly, like we're seeing tokenization, we're seeing the Genius Act, stablecoins, other opportunities to broaden deposits and payments outside the financial ecosystem.

Yes. Matt, I didn't realize you're referring to that, sorry. I mean, at this stage, I'd say that's in Australia, really more of an R&D focus. I mean we're paying attention to it, but it's not something that we're spending a lot of time on at the moment.

Great. Thanks, Matt. So we'll start in the room. I'll start with Jon. third row from the back.

Jon Mott from Barrenjoey. A question probably few, if you could. BFS has been hugely successful as we've been talking about, especially the retail and the mortgage product. If you look at the mortgage business, 6.8% market share, it's utilizing $7.6 billion worth of group capital. And if you got the current run rate that you're going out with 15% of the flow, you're going to be at 10% share of the system of the book within about three years. But to achieve that, you're going to chew up to about $12 billion of capital, which will chew up again about 50% to 60% of the group's retained earnings over that period post dividends, if you do it.

So are you comfortable with the amount of capital if they hit all the targets that they're going to use that so much of the group's capital is going to be required to fund this great growth opportunity in the retail BFS area? Or do you have to look at either pulling that back eventually? Or do you have to look at other capital providers?

Yes. No, I mean, I think we have four really excellent franchises, as you've heard the team talking about. And we see a huge runway to grow all 4 of them, and we want to empower all of them to grow if they're delivering appropriate return for the risk we see in that particular business line. So to the extent BFS has capability to keep growing and delivering the sort of returns it is, which are market-leading in Australia and also really good return for the risk globally, we're very happy to support that.

Our weighting of businesses may change from time to time. But frankly, Ben, sitting in the front row, we have massive runway to grow in asset management. We're very small. There are $1 trillion asset managers around in the world in private markets. We also have a long runway to grow in investment banking. And JPMorgan, the biggest investment bank is $1 trillion market cap. business and in commodities and global markets, again, where we're competing not just against trading houses and hedge funds, but the big energy players. We are a small player, and we've got many more sectors and regions to go into.

So we see scope for all four of our operating businesses to keep growing. And the mix will depend on which of them sees better opportunity, return for risk. And the combined ROE will be a blend of whatever that delivers. But ultimately, our view is we're happy to back BFS if they can keep delivering what they've delivered.

Okay. So there's no rationing. It will continue to grow based on the current economics, you think you can continue to fund huge growth in this business over the next couple of years?

Yes. I mean our hope is that the market will continue to fund us for each of these businesses if we are delivering the sort of return the market wants for the risk. And then the house return will be a blend of that. But our expectation and hope is that the market will give us capital to put into a BFS business. It's earning its cost of capital and then some. So we should be able to raise both funding and capital.

And to Matt's question, I mean, the deposit side is a key part of it. We call it a liability-led business, but our presence in the deposit pool is still small. And the way this really well tightly disciplined regulated market works, deposit-taking institutions are the ones that are trusted to take those savings. And so while other innovations grow in terms of the investing side, ultimately, there's a limit in how much they can grow if they can't access the deposit pool. So we see long runway in both funding and capital.

Great. Why don't we just keep on that row. So we'll go to Ed, I'll come back to you, Brendan. Ed.

Ed Henning from CLSA. Just a point of clarity in the presentation today, it was talked about technology costs being about $2.3 billion and being stable. Was that stable at $2.3 billion or stable at 25% of the cost base? And within that, thinking about technology costs and moving more to cloud, which we heard a lot today, those technology costs aren't going and they're growing above inflation. Are you able to get enough costs out and savings to offset that increasing cost growth?

Yes. I think, Nicole, you can comment, but we're stabilizing around the absolute dollar level is what we're saying. We've had to put in massive investment. And it's a little bit capitalizing on what we've been able to do in base technology and in the data side, but it's also our businesses. We are really uplifting our operating platform materially as we grow scale globally and also as our social license becomes a bigger issue and we have less tolerance for risk, at some point, we expect that to start delivering returns. We're stabilizing the spend now, but it's the outcomes and the return on that spend that we're focused on. Nicole?

I think you've answered it actually. Yes. So the $2.3 billion is forecast to remain about the same for the next few years. As David mentioned, we have swapped out some of the fixed costs with closing data centers -- we take a very disciplined approach to how we manage our technology spend, particularly around cloud consumption. So as Gaurav mentioned, the benefits of having a cloud-native platform is we can scale up, we can scale down. So we have full transparency around cloud consumption. So we're quite disciplined around the spend there.

What we're seeing for businesses like CGM, while we have been ramping up the investment, there are a number of programs we've been investing in, as Gaurav said, in a strategic way to address some of the regulatory programs of work. Over the next 12 months, they are starting to tail off. And so with -- combined with the efficiencies we've spoken about, we are redirecting a lot of that spend, but we must continue to invest as technology matures, as we drive more front-to-back automation.

So we go to Andrei.

Andrei Stadnik from Morgan Stanley. If I can ask my first question around MAM. You highlighted the excellent systematic strategy that's been running ahead of Australia. Going forward, now that MAM has been reshaped with the sale, are you going to be more assertive in terms of thinking how some of the strain based strategies and it can be exported its, and what are the strategy changes could we expect from MAM?

Yes. And I'll let Ben comment. We're heavily a private markets business, but we really saw ability to deliver alpha in fixed income and systematic equities here in Australia, which is why we maintain that business. And Ben systematic equities, Benjamin was talking about it. We do have the scope. We've kept evolving the indices against which we offer solutions, et cetera, and can go more global. But what are your thoughts?

Sure. Thank you for that question. Good afternoon, everyone. Nice to finally get a question.

It's a nice change.

It's a nice change. It is a nice change. I think the first thing as we've discussed before, is that we're focused on doing two things in MAM, being a full-service asset manager here in Australia in our home market. And you probably got a sense of why that is today because we have big businesses here, including in the public side, and those businesses generate very good results for our clients, but also very good returns for shareholders. So it makes sense for us to operate there. And with the slim down global platform, we're really focused on private markets.

There will be some things that we do outside of Australia, but also here in Australia that we can always move across different geographies. And Benjamin's business is one of those. So that already has a global client base. Can we do more with that business to provide more solutions, not just say, to so many Australian clients, but clients around the world and can we expand that offering? That's something certainly that we're doing, and we'll continue to invest in that technology. And I suppose that's part of having that more focused business is it allows us to work out where are we really driving great results for clients and then how do we really scale that up where it makes most sense.

And if I can ask my second question around AI and MAM, particularly from the point of view, there are many, many portfolio companies within MAM. So how are you using AI in terms of capturing the data insights coming from those companies, particularly given some of your big American and European peers have been quite aggressive in using that data for some time. So how are you using your portfolio companies to further enhance your data and AI?

Yes. It's something the MAM team are very passionate about. So again, I'm happy to throw it to Ben, but we are -- there's a whole lot of insights we can grab from our few hundred portfolio companies that will help us. You can talk about the people would you've hired and the investments you make.

Yes. So we've got 192 portfolio companies, and we've also got a long heritage of investing. And if you think about when we make investment decisions going into the future, what we want to be able to do is, first of all, call on all of that investing experience over the last 30 years couple that with what we're currently seeing in the marketplace across our 192 portfolio companies and then look at further external data and make a decision and an investment committee on that data so that going forward, the best IC members are likely to be AI IC members. And that's really the state we want to get MAM to. And that's what a lot of the discussion in the asset management industry is around is that how do we actually take that expertise and rather it be about key people and continuity of key people, really capture that data and make the best informed fact-based decisions. And so what we're doing besides bringing people into MAM who have the right data and AI background to really investing in that people talent, we're rolling out things like Chronograph. And so Chronograph is a tool that all of our portfolio companies input data in a real-time basis. That allows our asset managers to look in and see what's happening in their portfolio companies. It allows them to compare across regions, across different funds, across different sectors. And then as you can imagine, as the technology becomes more proficient, we then overlay an AI solution to that, something like [indiscernible], and that allows us then to upgrade further our investment decisions. And that is exactly the path that we're currently on, and a lot of that has already been rolled out.

I think the second part of your question, Andrei, is really then when we think about what we can then do to our portfolio companies, so there's the information and there's the AI of investing and then there's the actual value creation in the portfolio companies. And so we've invested in a variety of coworker AI type businesses that allows us to bring that skill set in, which really means that we can either reduce costs or in some cases, really be better at capturing revenues in industrial businesses.

So, in every investment case we put together now, we're thinking about the opportunities and how we better make that investment. We're also thinking about the risk that AI might obviously cause for that portfolio company or sector. And thirdly, we're then thinking in terms of the investment case, what technologies, what investments do we need to bring into this business to modernize it and really capture that technology dividend.

And the other area without going into detail now where you're using it a lot is engaging with the investors into the funds as well. So understanding their needs, shaping reporting to them, all of that. MAM is using it a lot. I should say the bulk of our $2.3 billion tech spend is recovered in the operationally complex areas of BFS, CGM, particularly and also in FPE with the regulatory and financial reporting. But -- and MacCap does have the equities, which is a more operationally complex business. But MAM and MacCap still are using technology a lot, even though it's not the biggest of the $2.3 billion spend. to drive outcomes in the businesses.

Great. Thanks. We go to Brendan just crossing.

Brendan Sproules from Goldman Sachs. Just got a couple of questions on BFS. You showed us a little bit around the cost to income today. Just thinking as you move your market share towards double-digit in mortgages and in deposits, should you have a structurally lower cost to income than, say, the major banks because you just don't have that legacy infrastructure that they have, but also you've made quite a bit of investment in technology in, say, the last three years?

Yes. Definitely, Ben, I'll hand straight to you on that one.

Thank you. I mean I think the competing forces are that we do have some advantages in the investments we've made. But on the other hand, we lack scale, which is the key point we've been trying to address today. So we clearly need to build scale. I don't see that we'll get to -- you said a double-digit market share and that we've got some sort of competitive advantages that the others can't meet. I mean I think they will still be significantly larger than us even at that sort of market share. We said today, we're between 1/4 and 1/2 their size. And that does give them significant advantage just in terms of the sort of the share P&L firepower and the investment budgets that creates.

So, I think, in that respect, we're doing well. As we said, they're formidable competitors, and they have a raft of natural advantages that they've built up. And I think it will remain the case for some time.

Yes. And we're investing back in a lot of things as well to keep moving the needle. But you saw where our CTIs are now with the scale that we have. So we probably can bring them down, but will they drop to the level of the biggest competitor just at 10%? That's not necessarily the case.

Yes, I doubt it would be the case. That's right.

Yes.

And just a second question on revenue streams, like you've got quite good share in mortgages and deposits. But what's the ability to expand into advice or into unsecured lending or into payments or markets type activity, FX as you look forward?

Yes. Thank you. I mean, look, we -- one of the reasons we've been successful, I think, is we've been very focused. And we say no to a lot of opportunities. So part of our success is about having simple products and simple processes and achieving scale on those things rather than sort of spinning out into new things.

I think that's sometimes tempting but being not the right strategic choice certainly for us. And so as we go into the future, I mean, I think my hope is that you'll see us continue to build a much bigger business, but with the same sort of relatively narrow, simple product offerings that we have today, continuing to give customers value in those products, not looking to try and move into adjacent areas at this stage. I don't think that's going to be the right path for us.

And I think, Brendan, overall, as I was saying, our approach to managing risk is we operate from deep expertise and then have patient growth. We've got a long runway to grow in personal banking, then into business banking and also in wealth. So I think the prospects of us doing something that's landing the golf ball on the moon is unlikely. There's plenty to do in the areas in which we've built decades of expertise.

We'll go to Andrew in the second row, just at the front here.

Andrew Triggs from JPMorgan. Just a couple of questions. Firstly, the 13% ROE that Ben mentioned earlier, just checking that that's based on the Tier 1 requirement of 10.5% of risk-weighted assets that's mentioned in the pack. So if you were to hold it to a higher capital requirement, not quite akin to a major bank level, but somewhere between that level and the major bank level, it would bring the ROE down somewhat, but still well above the cost of capital.

Frank, do you want to take that? All right. Then you go.

Well, the 13% I talked about is at a higher cost of capital, that's the internal cost of capital charge to BFS. And -- but you are right that if we were held to the capital standards of the big 4 banks, then they have slightly higher capital. And so it would bring that ROE down a little, but it would still be comfortably above our cost of capital and compare very favorably with the market even at those levels.

And just a second question, just -- I mean, one probably not for you. in terms of the -- sorry, the broader BFS division, there was plans to invest significantly in the platform within the wealth space. Is that still on the agenda given there's been some changes to the perimeter of the business recently?

No, we've certainly still got commitment to investing in our wealth platform. And that is the main thing we offer in -- well, we have the private bank actually that's a much higher service, higher touch service for the private bank clients. But in the general financial wealth channel, what we do is offer a piece of architecture that is top quality technology for financial advisers and planners, et cetera.

I think the things you're referring to are just understanding more the nature of the savers whose money is being invested through those platforms and making sure we protect that money. So certainly with retirees, this is supposed to fund their retirements. We need to have much more control on where that money can be invested, and we're stepping up what we do on onboarding, monitoring, et cetera. But in terms of technology, we want to keep investing, and we think there's a lot more room to grow in terms of what we offer there in the basic wealth.

We go to Brian.

Brian Johnson, MST. Ben, you're the man of the moment. But I think this might be a question for Frank. So, Frank, we have a little Macquarie. It is a nonoperating holding company. There's about $4 billion in hybrid capital raised in the NOK which miraculously becomes capital in the bank. The 13% ROE, you guys have said it. So we've got $7.5 billion in surplus capital or thereabouts. You're a D-SIB. So I don't think the market would like to see the core equity allocator below what it is for the other D-SIBs, which is the major banks. The 13%, is it premised on still being able to cycle down the $3.9 billion of capital? Is it based on running the capital at the bare minimum as opposed to the 11.25% ex-dividend core equity Tier 1 that a bank should run at?

Thanks for that quite detailed question. In relation to the cap, as Ben said, it's based on what he outlined at that 10.5%, right? And so this is something that we're kind of -- sorry, Yes, higher than that at the moment. So it's something that we obviously will continue to evolve. And obviously, in relation to what's happening with nonbank hybrids as well, that was something that we'll continue to assess and then work out what the required return requirements are in relation to all of the businesses, not just the BFS home loans business.

Okay. And then a more specific question for Ben. Ben, if we have a look at the deposit market, a deposit at call in theory that's priced at a really hot rate gets captured by the liquidity coverage ratio as an outflow. That's what those conditions that they tack on to the accounts is really about. Could you explain to us what makes these deposits so much stickier that you can actually lend them out. They seem to be originated at a high rate. There doesn't seem to be the bells and whistles. Could you just explain to us what makes these deposits so stable from -- not from a real-world thing because it's the rate. But could you explain to us how you managed to pull off that magic where from a regulatory perspective, they're sticky as well?

Yes. I mean I think the other thing I'd just add to your first question, Brian, is that, of course -- and it goes to the question earlier on, we're generating capital, of course, with the earnings of the business as well. So it's not like -- I don't think we look at BFS as sort of taking capital away from the group. I think we look at BFS as contributing capital to the group, and we're using that capital for our own growth.

In relation to the deposits market, I mean, obviously, we comply with the regulatory rules around liquidity coverage and so forth. But I think when the major banks have the conditional savings rates, that's not really about trying to optimize for liquidity coverage because those conditions aren't about the tenor or the time frame within which the customer can withdraw the funds. I mean there are products like that in the market, notice savers and so forth, which look to address the regulatory rules around runoff and the net cash outflow calculation.

But in relation to the conditions that you see on savings accounts, I think they're more about profit optimization through, I guess, trying to look at the fact that as the ACCC has found, by far, the bulk of customers don't meet the conditions. And so I imagine that people with those products in the market are thinking about their effective payout rate on the deposit rather than the rate that the customer actually earns. And obviously, that's attractive to them as a funding source, but not a great customer outcome, which is why we think our approach is a better approach. It's more a customer-centric approach. And as I said, I think customers are seeing that and hopefully, over time, more and more will. Does that address your question?

More or less. Thank you.

Sorry, were there last little thing I was going to do is make a comment on capital that we, as a bank, do hold very high levels of capital as an Australian bank. And that's because of things like the unquestionably strong regime, the way we have applied standardized approach to counterparty credit risk in Australia and amounts that we're holding because of the CGM business. And I think it's quite public that our capital has doubled over the last few years from about $17 billion to $34 billion. I don't know, Andrew and Frank, how public we've made it, how much of that is because of the regulatory changes that have gone on, but it's a meaningful proportion. So we hold a lot of rate cap in our business is a huge resilience.

And I think in BFS, if you look at the risk versus the capital invested, I think we're feeling like we're really well capitalized for the risk in our credit quality is phenomenal. We're at like a 58% dynamic LVR. So we're able to pick super quality credits, probably a better book than all of our peers, but holding very strong capital behind that, which we're comfortable. This is a market we want to operate in and comply with all the regulatory requirements. But it is one of the features of this market is very disciplined in terms of risk protection and capital requirements.

Great. I think we're done with questions in the room. There's no questions on the line. So thank you for giving us almost three hours of your time, and thanks for your ongoing support. Thank you very much.

Thank you.

Macquarie Group has announced a net profit after tax of $1.655 billion for the half year ended 30 September 2025, up 3% on last year. The group declared an interim ordinary dividend of $2.80 per share.

Shemara, Macquarie has delivered a strong performance across the group. How would you characterize the overall results?

Well, you're right, Laura. We had a result as you saw $1.655 billion for this first half, which was up 3%. I think what it reflects is underlying growth of franchise across all of our operating groups.

And for Macquarie Asset Management, the big news was really the sale of Aligned Data Centers in the U.S. How did that impact the result? And what else contributed?

Well, the first half result was up 43% on the prior comparable period. And yes, we did have good performance fees. MAF2, which is our Australian and Asian funds delivered good performance fees. Aligned contributed through recognition of the performance fees on the co-investors. But we also had good growth in the underlying business. So we had $11 billion of new capital raised and also good investment going on of $12 billion in assets like Diamond Infrastructure Solutions, Vocus. So across all our private markets areas, real assets, real estate, credit, we had good growth.

So there's been sustained growth across the banking and financial services, mortgage and deposit book. How has that driven their results?

Another strong result from BFS. It was up 22% on the prior comparable period. And as you say, the mortgage book, we continue to grow. It's now sitting at $160 billion. It's grown at more than 3x system. And so we're 6.5% of market now there. So that's very good. And our deposits are at 6.1% of market, now sitting at $190 billion. So that is driving ongoing good growth for BFS, which has managed to basically double its earnings since FY '21 with this ongoing approach of a digital-led customer experience-focused banking offering that is continuing to grow very consistently and steadily.

So how would you describe the first half of the year for Commodities and Global Markets?

Commodities and Global Markets, interestingly, our operating income line, which is equivalent to our revenue line was consistent with the prior period. But what we did have is that the mix has changed because we had a more subdued period for commodities. So Financial Markets and Asset Finance grew revenues nicely and became more than 50% of the contribution this year. Despite that top line consistency, we did have increase in operating expenditure with investment in our operating platform, including to comply with regulatory requirements and some transaction costs. So that brought the CGM result down compared to the prior comparable period.

And finally, for Macquarie Capital, it seems like market conditions have been more supportive. How did that play into their results?

The result was up 92% for this half versus the prior comparable period. And yes, we did get contribution from a good result in our Advisory and Capital Market Solutions business, where particularly in the Americas and in Australia, we had some good transaction realizations and fees. But the private credit book also contributed well. It's up $3.9 billion, and we also had some repayments contributing in this half.

Looking ahead to the second half, what's the outlook for Macquarie's businesses?

I think overall, we have maintained our outlook as we guided at the beginning of this year on an overall basis. And I think for the medium term, we feel that we are well positioned with our diversified platform and specialized franchise capabilities to continue to deliver good returns.

Thanks so much for joining us, Shemara.

Thanks.

Good morning, everyone. Thank you for joining us here. Welcome to Macquarie's First Half Financial Year 2026 Results Presentation.

Before we begin today, I would like to acknowledge the traditional custodians of this land, the Gadigal of the Eora Nation and pay our respects to Elders past, present and emerging.

As is customary, today, you'll hear from our CEO, Shemara Wikramanayake; and our CFO, Alex Harvey, and then we'll have an opportunity for you to all ask questions at the end.

So with that, I will hand over to Shemara. Thank you.

Thanks very much, Sam, and good morning, and welcome, everyone, from me as well. So as usual, we'll start by just noting the footprint of 4 operating groups we have in our business and the 4 central service groups that support them. There's no material change here. The only thing I thought I would mention is under Macquarie Asset Management that as of the 1st of September, we've moved the green balance sheet assets into the central Corporate area. And this is basically to free up the asset management team to focus on the now very growing fiduciary business in the green area that we've managed to seed and build based off the capability we built on the balance sheet, but the central team will now come in the Corporate area and work on those assets from here.

The other thing I'd note on this slide is in this half, we had 16% of our earnings from market-facing sources and 56% from annuity style, which is base fees in Macquarie Asset Management, the BFS earnings and then the remaining 28% from areas like in Commodities and Global Markets, the financing, client revenues we earn and also the performance fees in Macquarie Asset Management.

So turning then to this half result. As you will have seen this morning, it was up 3% on the prior comparable period at $1.655 billion. That represented a return on equity in this half of 9.6%. Even though the result was up 3%, the return on equity was down slightly, and that reflects the growing capital position we have.

And in terms of the contribution to that result by operating groups, you can see here that we had increased contribution from 3 of our operating groups. So Macquarie Asset Management driven principally by an increase in performance fees in this half. Banking and Financial Services, ongoing growth in our books there at our market position. Macquarie Capital, it was actually high fee income in this half, particularly in Australia and the Americas and our ongoing growth in our private credit business.

So all 3 of those up. Commodities and Global Markets, even though the revenue, the operating income was broadly in line with the prior comparable period, it's increase in our operating expenses as we invest in our platform that brought that result down.

And before going into detail of those groups, I'd just note, first of all, as usual, our assets under management, they're sitting at $959.1 billion, mostly driven by favorable market movements and asset valuations, offset by some outflows in equities and unfavorable foreign exchange. This number will come down slightly when the sale of the public investments assets outside Australia to Nomura closes. So we'll update on that in the next results.

And in terms of the regional makeup of our income, it's broadly consistent with what we've had for recent years, Australia making up a bit over 1/3 in this half, and the Americas a little under 1/3. Europe, Middle East, Africa, about 1/4 still, and the balance in Asia.

So then turning to the operating groups, starting with Macquarie Asset Management. And I should say we've got all our Group heads here in the front row. So Ben Way is here in Australia, sitting here and able to answer questions. But the result there at $1.175 billion was up 43% on the prior comparable period. The big contributor there was performance fees, and Alex will take you through in detail in a little while where we earned those, but they are around the world. The equity under management was up 2% at nearly $225 billion. The team raised about $11 billion in the half and invested about just over $12 billion, leaving dry powder of about $23.5 billion in private markets.

In public investments, as I said, the majority of these assets are due to be transferred to Nomura in a transaction that's on track to close at the end of the calendar year. So we'll probably report in more detail on the remaining Australian fixed income and equities portfolio going into the new results from here.

Then turning to Banking and Financial Services, again, as I said, up on the prior comparable period, up 22% at $793 million. And that's driven by, as I said, the ongoing growth in all our books as well as our funding, our deposit funding. The home loan portfolio was up just over $160 billion, which was an increase of 13% on prior comparable period. We're now at 6.5% of the mortgage market and have been growing at 3x system there, as you will have seen. And that is supported by strong growth in deposits, which were up 12% to over $190 billion. That's representing just over 6% of the Australian market. And the business banking loan book was also up to $17.4 billion, which was up 4% on the prior comparable period.

Funds on platform also up 8% on the prior comparable period. And this is all being driven by our digital offering, focusing on customer experience. And when Alex goes through it, he will talk about how our expenses went up slightly as we continue to invest in the tech platform, but all up -- earnings up 22%.

And Commodities and Global Markets, as I mentioned, was the business that was down 15% to $1.113 billion. Now it was a very subdued environment globally, as you will have seen in Commodities. Despite that, we were able to have good risk management income in our North American Gas & Power business as well as our global oil business, but that was offset by hedging activity in the agriculture sector.

But a couple of things I'd note that are interesting. While the commodities area has been more subdued in this period, the financial markets and asset finance businesses keep growing our franchise and the earnings continue to step up year-on-year on those. And in this half, they were actually 54% of our contribution from CGM, which typically has 60% coming from the commodities businesses.

The other thing I thought was worth noting in CGM is the franchise continues to grow. So 10 years ago, I think, Simon, we were doing about $1.7 billion of revenue across CGM. When I started as CEO in 2019, we were at $3.8 billion. Last year, it was $6.3 billion. And this year, we're looking at broadly in line around that low $6 billion number. So the revenue line or operating income continues to grow.

What we have had in CGM is a big investment in our operating platform as we uplift the platform for a very diverse and globally complex spread out business and also respond to regulatory requirements in that business. And again, Alex will take you through the details of how our operating expenses have stepped up, and that's the main thing driving the lower net profit contribution in this half.

Macquarie Capital, up 92% at $711 million from about -- I think Michael Silverton is also with us here from New York. I think it was about $370 million in the prior comparable period. And as I said, the 2 big contributors to that are, first of all, in our fee income, particularly here in Australia and in the Americas, we had a strong half. That was a little bit of carryover from the last half transactions as well. And then our private credit book was also up $3.9 billion and continues to grow and contributed together with some repayments.

Then turning to our funding and capital position. Our funded balance sheet remains strong. We have term funding exceeding our term assets and good matching in funding. We raised $15.9 billion more of term funding in this half and our deposit funding is now sitting at $198.8 billion. And our capital position as well, we remain with a surplus of $7.6 billion over our Basel III minimums down from $9.5 billion. The changes were increased for the profits that we made in this half, offset by the final year dividend we paid, business capital requirements and then other movements like the foreign currency translation reserve.

The businesses absorbed $1.1 billion in the half. And you can see there in the right-hand half of that graph that the 3 businesses that did absorb capital mostly Macquarie Asset Management, $500 million in terms of co-investments underwrites as we grow the platform and invest in our funds. For alignment, BFS continued to grow by about $700 million over the half with growth in all of the home loans, business banking books, et cetera. And then CGM increased credit risk due to business growth. And also, we bought the Iberdrola U.K. smart meter portfolio in this half.

Our reg ratios as well are sitting comfortably above the Basel III minimums, as you can see there. And the last thing on the results, I wanted to say before handing over to Alex was that the Board has declared a half year dividend of $2.80 per share, 35% franked. That's up from the $2.60 in the prior comparable period, and it represents a 64% payout ratio. And with that, as usual, what I'll do is hand over to Alex to take you in much more detail through the numbers.

But before I do, I just wanted to note that this is the last time Alex will be taking you through these numbers in detail. I've had the privilege of partnering with Alex for 28 of these updates that we've done for you. And Alex has made just such an incredible contribution, as you've all seen. He is so across every number. He's got a razor-sharp intellect. He is very commercial. And so not just in reporting results, but we spent a lot of time on investments, on realizations, on business restructurings through a whole lot of market cycles, COVID, interest rate surges, et cetera.

And he also has built an incredible team in that period in terms of financial reporting, the regulatory reporting and the uplift we've had, the tax engagement with stakeholders through corporate affairs and now the people and culture team sitting under Alex. I think we've raised over $200 billion of funding, I think, Alex, in your time as CFO and nearly $5 billion of capital. And the market cap has gone up 150%. All thanks to you, but incredible contribution from Alex. And I should just say as well, before his 8 years as CFO, that's less than 1/3 of his time here at Macquarie. He was in Macquarie Capital, leading so many entrepreneurial businesses here and up in Asia after coming across from the game-changing Bankers Trust acquisition. So we're very sorry, Alex, that we won't have you with us.

We know you'll be watching closely as all our former colleagues are and Alex is working around the clock to the last minute. But also I think in finding Frank to come from Macquarie Asset Management from a big global role there to really passionately take on the CFO role. I've worked with Frank for many decades as well. He's part of the great legacy Alex leads us, not just Frank, but the whole team that are in FP.

So thank you. And Alex, Frank and I look forward to engaging with all of you over the next few weeks as he finishes his last few weeks, but I will let him do his swan song, usual incredible analysis of our results.

Thanks, Shem. It feels like a great risk of disappointing after that entrée. But thanks very much for all those comments. And obviously, it's been an incredible 3 decades working together and a real privilege, obviously, to have this role, but a privilege to be at the organization for such a long period of time and the opportunity to work with thousands of people all over the world, including obviously, the executive committee in front of me has been incredible real honor and a real highlight. So thank you very much for those comments.

So as usual, I'll take you through a bit more of the detail. Obviously, good morning to everyone in the room from me. So starting with the income statement. You can see operating income for the year -- for the half, up 6% on where we were first half of last year. And the key drivers there at the top of the page, the net interest and trading income, up 9%. That largely reflects the growth in the average loan volumes in both BFS and in Macquarie Capital, the Principal Finance business. You can see fee and commission income up about $600 million or 18%.

Two key drivers there. We saw an improved result from the advisory business in Macquarie Capital. We saw an improved result from our Asian equities business from a broking viewpoint. And obviously, we saw a big step-up in the performance fees coming through the asset management business. At the bottom of that income slide there, you can see investment income and other income down about $500 million from where we were this time last year.

And there were 3 key drivers there. Firstly, as people recall, in the first half of last year, we sold 39 Martin Place that generated a profit for the group that obviously didn't repeat in this half.

In addition, over the half, we didn't see the realizations that we saw in the first half of last year from our green investments on balance sheet, so they didn't repeat in the first half here. In addition to that, we also took some impairments on our on-balance sheet green assets, particularly in the offshore wind part of our portfolio, and I'll take you through that in a little more detail later.

So, for a net operating viewpoint, as I said, up 6%. Operating expenses overall for the half were up 5% from the first half of last year. There's a couple of key drivers there. You can see the employment expenses line up about $200 million. And there's a combination of things there, principally related to the performance of the group. So we had increased profit share expense coming through. In addition, we saw some wage inflation coming through the group, partially offset by a reduced average headcount. So average headcount across the group is down about 3% from the first half of FY '25.

In addition, we see a step-up in the other operating expenses, and that's really the investment that we're making -- large investment we're making in upgrading the platform from a technology viewpoint. A lot of those expenses obviously are in the BFS business, as Shem talked about, but also in the CGM business. So operating expenses for the half up 5%.

Income tax rate at 31.8% from last year was 29.9% for the first half. The income tax expense is up a little bit from -- income tax ratio is up a little bit from where we were last year. That's a combination of the nature of the income coming through the P&L and the geography of income coming through the P&L.

In addition, this half, we had some nondeductible expenses, not only the hybrid, but some nondeductible expenses that are pushing up our effective tax rate. So most of those we would not expect to repeat into future periods.

So if I now just go into the business groups in a little more detail and starting with the Asset Management business, as Shem said, a really strong result, up 43% on where we were last year at $1.175 billion. And the key driver there, you can see in the middle of the page there is the increase in performance fees of $353 million. Those performance fees are arising from a range of capabilities around the world.

But in particular, in this half, we saw additional performance fees from MAIF 2. MAIF 2 was able to divest another asset in Asia, really successfully divested an asset in Korea. So that gave us the opportunity to have a look at the performance fees coming out of MAIF2.

And in addition, more recently, obviously, you would have seen the announcement of the successfully entering into a sales transaction for our Aligned Data Centers business in the United States. That investment is in MIP IV and MIP V. In addition to that, we have some co-investors in that asset itself. And on those co-investment agreements, we have performance fees.

So we're able to bring through performance fees associated with those co-investment agreements in the first half. So the principal driver of the movement really is the performance fees. You can see base fees up $29 million, so $34 million across the private markets business, and that really reflects a period -- a good period of investing.

And then strong expense control, driving what I think is an excellent result for the group. And obviously, that sets up both MAIF2 and MIP IV and to a little later extent, MIP V to deliver those performance fees in coming periods.

In terms of the underlying assets under management, as Shem said, $959.1 billion for -- at the end of the half. Private markets driving most of that gain, $27.6 billion increase in private markets AUM, and that reflects a good period of investing. So we invested, I guess, $12 billion of equity, nearly $20 billion of AUM over the course of the half.

We also had some net valuation changes, particularly in relation to the digital assets that the Macquarie Asset Management business manages around the world.

A little bit of a drawdown on the public investment side. Markets have obviously been really strong. So you see a pickup of $40 billion. We continue to see net outflows, particularly in our equity portfolios. And obviously, from an FX viewpoint, we had a little bit of a drawdown from an FX viewpoint given the weakness of the U.S. dollar at the end of the period.

So turning now to Banking and Financial Services. Again, a really strong result from $650 million this time last year to $793 million, a 22% step-up in underlying net profit contribution. And the main driver there, obviously, is the increase in personal banking. And that increase is coming from average loan mortgage balance up 21% from the first half of last year and deposit balances in average terms up 27%. So a really strong period of growth.

As Shem said, over 3x system growth in the mortgage side. So again, great to see the product capability that Greg and the team are delivering to the market, really attracting a growing customer base. That's fantastic to see that. Business Bank broadly in line. We had a bit of volume growth in the business, but given up that volume growth largely in margin compression. The wealth management part of the business picking up largely as a result of the underlying performance of markets.

I might just spend just one minute on the expenses side. So you can see this should be a very familiar story to people. I think what Greg and the team have done is invested heavily in the technology platform that supports the digital financial offering -- the financial services offering in this marketplace. We continue to do that. You can see the expenditure up $30 million on the technology side this year.

On the other side, obviously, we're seeing benefits coming through from that digitization, that efficiency benefit. So that's drawing down the underlying cost base of BFS in those non-technology areas.

In terms of the underlying story, obviously, everyone -- all the products and capabilities moving in the right direction. As Shem said, home loan is about 6.5% of the market now. I think deposits is about 6.1% of the market, but there's been a -- continues to be really strong growth across all of that capability, and that obviously augurs well for the outlook for the business going forward.

Now turning to the Commodities and Global Markets business. As Shem said, net profit contribution for the period down 15% from where we were this time last year. But the underlying story, I think, is an interesting one. The operating income across CGM is basically broadly in line with where we were for the first half of last year. And you can see the real -- the pull down from a net profit viewpoint is really the expense base. So expense base has stepped up nearly $200 million over the course of the period, and I'll come to a little bit of detail in a second.

But if you look at the income line for a second, so commodities were down $26 million. Risk management income up. We saw a better period of contribution from our North American Gas Power and Emissions business. We saw a better contribution from our global oil business, partly offset by a reduced contribution from the agricultural business that had a strong period of time last year. We didn't see that repeat into the first half of last year. So risk management income up $37 million. Lending and financing down $27 million. That largely reflects lower balances from our global oil financing business.

And on the inventory management and trading line, down $36 million. Mostly that reflects the timing of income recognition on transport and storage contracts. So the underlying trading performance of the business was consistent with where we saw for the first half of last year. Really strong result from financial markets, again, up $52 million. I think that's about 6% growth from where we were first half of last year. And that sort of extends a trend that's been going on for now, certainly my whole time here as CFO. So nearly 8 years of underlying growth in that financial markets part of the business, which is obviously a reflection of the customer numbers and the capabilities we're providing.

And on the asset finance side, up $31 million, which reflects the growth in the shipping loan portfolio in the asset finance part of that business.

On the expenses side, as I said, up $200 million. There's really 3 things there. Firstly, we're continuing to invest in the platform. We're investing in the data asset. We're investing in the governance and the control environment. We're investing in the platform to make it scalable. We're using more technology in that business to make it scalable around the world. So that's one thing that's driving the expenses.

Secondly, we've obviously got some remediation programs underway. Those programs will come to a conclusion. But nonetheless, we'd expect them to extend at least for another few halves. And the other thing we saw in the first half was some one-off expenses associated with transactions. For instance, as people will be aware, we bought the Scottish Meters business in the first half. There are obviously some transaction expenses associated with that, and we wouldn't expect those transaction expenses necessarily to repeat going forward.

In terms of the underlying drivers, hopefully, a pretty familiar slide for everyone here. You can see the customer numbers continuing to accelerate on the right-hand side there, both across financial markets and across commodities. The operating income is still heavily weighted toward the underlying client franchise. And the regulatory capital footprint, pretty similar to where it was at March '25 and still dominated by credit capital, which is consistent with that customer-facing orientation of the business.

And finally, from the business unit viewpoint, Macquarie Capital, up $711 million, a 92% increase from this time last year. You can see the drivers there, fee and commission income, up $179 million. I think that's a 27% increase. That largely reflects advisory income in Australia and the U.S. It obviously reflects the brokerage income in Asia as well.

On the advisory piece, obviously, the market conditions have improved, but we also -- and we saw some large transactions coming through this half, which is fantastic for Michael and the team. We did see some pull-through from transactions that were well progressed at the back end of our '25 financial year that actually completed in '26. And so that came through in the first half. And we obviously talked about that at the AGM.

And then the net income, the other piece, obviously, is the net income on the private credit portfolio up $177 million. There's really 2 drivers there. The average balance of that portfolio is up about $4 billion. So that's obviously driving margin coming through the P&L.

The other thing we saw is some repayment income, early repayment income on a number of the credits coming through. So obviously, early repayment income, we wouldn't necessarily expect to repeat into future periods. And then we had lower impairments over the course of the half, reflecting better market -- macroeconomic conditions that are reflected through our ECL modeling. Good cost control, obviously continuing.

In terms of the capital alongside the clients, pretty similar to where we were this time or 6 months ago. And the private credit book, now about 170 positions, well diversified in sectors that are pretty defensive and strong cash flow businesses. So all this underlying capital and credit is driving the earnings growth for MacCap.

From a corporate perspective, one of the things -- obviously, we -- there's some noise coming through corporate this half, and that noise largely relates to the fact that we moved the green -- the on-balance sheet green assets from the asset management business into the corporate center for reasons that Shemara talked about earlier just in terms of the focus that MAM has on the fiduciary business.

The assets we've moved into the Corio and the Cero, the platform assets that we intend to divest to third parties over time. So we thought given the changes going through the center that we'd include this bridge in corporate, and I'll talk a little bit to that. So you can see one -- these are obviously expenses, $1.548 billion of expense for the first half of last year versus $2.137 billion for the first half of this year. And the primary driver there, you can see is that investment related and other expenses up $435 million. And there's really 3 major components there. So firstly, we didn't see the recurrence of profits from the divestment of green assets in this half.

So obviously, you didn't see that repeat. Secondly, we took some impairments on some offshore wind assets. And in particular, I think we've talked a lot about some of the challenges in the offshore wind industry in the U.S. So we took some impairments on our exposure to that in the first half. And obviously, we didn't see the repeat of the proceeds from the sale of 39 Martin Place. So those things are really driving that step-up -- that one-off step-up in loss contribution through the half.

The second thing to note is that on the operating expenses, obviously, operating expenses in the corporate, that's largely the profit share. In addition, it includes the expense we incurred in relation to a specific or specific legal matter that came through the corporate center. So we hope that slide is useful in terms of how you think about that -- the corporate contribution, if you like, or the corporate expense going forward into the group.

Now turning to a few other aspects of the financial management. So the regulatory compliance and technology spend, you can see at $649 million for the half, up about 9% on where we were this time last year.

We continue to invest heavily in the platform. We continue to invest in our ability to meet our regulatory and compliance obligations in terms of data, in terms of governance, in terms of documentation, in terms of technology that's removing some of that manual process that exists in that part of the business. So we continue to invest in that.

We've obviously got some programs of work to deal with, things like the license conditions associated with our OTC and derivative reporting. Those sort of things are featuring in our reg and compliance spend. And obviously, on the technology side, technology side, up about 9%. Again, Nicole and her team continuing to invest in the enterprise and things like cloud, and things like cyber and things like license fees and technology capabilities to support the scalability of the business. And technology spend is just under 20% of the overall cost of the group on a current basis.

Balance sheet highlights. The balance sheet continues to be really strong. It's been a good period of raising nearly $16 billion from Frank and the team in treasury. It's obviously been very favorable conditions. Look, most of that raising has been done in the bank rather than the group. Conditions have been really supportive. And so we've taken advantage of those conditions over the course of the half.

The business continues -- we continue to access a diverse range of funding sources, both from a currency perspective, a product perspective and a geographic and a tenor viewpoint, which is really important. And obviously, the weighted average life of the balance sheet continues to be quite long.

The deposit base that Shem spoke about before, just under $200 billion of deposits across the group today. The deposits are obviously funding the growth, largely funding the growth in BFS. And one of the interesting things, I think, just a credit to Greg and the team in terms of the capability they've developed there. You would -- you'll note that we've got 1.9 million depositors now in our business. Last year, that figure was 1.5 million depositors. So really strong growth in the deposit customer base.

And obviously, we continue to diversify and particularly focusing on savings type products, a more regular way products that are supporting the business going forward.

The loan portfolio, up 9%. Mostly, that's the home loans at the top of the page there. It's obviously driving the net interest income coming through the P&L. The equity investments broadly in line with where we were this time last year. So you can see a pickup in the asset management at the top of the page as we've drawn down some exposures through our funds.

Obviously, we moved some of those assets in that second line. But some assets that are on the balance sheet. Ben and the team have been able to syndicate the equity there into new products. So that's coming down a little bit.

The other thing I might draw out just on this page is just at the bottom of the page there in the line described as Corporate, BFS and CGM. You can see the green energy portfolio now reflected in Corporate. So it's gone from $1.3 billion down to $1.2 billion. That largely reflects the impairments I talked about previously.

And in the Corporate, another line at the bottom, it's gone up from $900 million to $1 billion. And that actually -- that step-up is mostly related to the assets we acquired as part of the settlement of the Shield Master Trust, which we acquired at fair value that are now managed in the Corporate center.

From a regulatory viewpoint, lots going on from a regulatory viewpoint. So I won't spend too long on this. A couple of observations. We continue to work constructively, obviously, with the industry and with APRA in relation to some reform agendas for prudential framework for banks, insurance and superannuation. We submitted our feedback to that, and that's expected for the consultation in the first half of '26. I think everyone is aware that the hybrids for banks are phased out from the end of this year. They'll obviously be outstanding until the 1st of January as we roll those -- 1st of January '32 as we roll those off.

But the other thing, of course, during the half is that APRA raised a consultation paper on hybrids for nonbanks or the NOHCs. We submitted our proposal, and there will be further guidance on that in the new year.

The other thing people would have seen is that we released our CPS 511 remuneration disclosures during the half. One of those -- what we were trying to do there is address at least some element of the feedback following the AGM strike in relation to the understanding how particular matters have been incorporated in remuneration outcomes for the Executive Directors and for the 2 CEOs across the group and the bank over the course of the last period. And we've gone -- we've done that, and we've obviously extended that back to FY '21. So hopefully, there's some useful information there for people to think about the way the Board thinks about incorporating the issues that occurred across the group into people's remuneration outcomes.

We continue to work with APRA on the reform programs that we've had in place for some years. Those reform programs are obviously very mature now and heading towards their conclusion. So we're pleased with the progress there. And as I said before, in relation to the various asset matters, we've stepped up programs of work to deal with the matters that are outlined on this page.

Now the capital position remains very strong, 12.4% CET1 ratio from 12.8% at the start of the period. Liquidity continues to be strong. The average LCR of 173%, down from where we might have been a few years ago. That largely reflects the work that we've all done in terms of high-grading our capability and precision with which we manage liquidity. So it's great to see that coming through, and we're seeing some benefits in terms of the funding across the group from that precision.

And finally, in relation to the capital management update, just a couple of things. The Board has resolved to extend the $2 billion buyback for another 12 months. As people recall, we bought just over $1 billion. So we have just under $1 billion that's available to buy back over the course of the next 12 months, pending other use for capital. And we think that gives us added flexibility to manage the capital base across the group.

And in relation to the dividend and the dividend reinvestment plan, as Shem mentioned, the Board declared a dividend of $2.80, 35% franked. The dividend reinvestment plan remains in place, and we intend to have that on at a 0% discount and to buy shares on market to neutralize any applications for shares under that DRP.

And so with that, I'll hand back to Shemara. Thanks very much.

Thanks very much, Alex, and I'll take you through the outlook now. And it was good to see you calling me Shem still Alex because he insisted, he calls me Shemara at results but sticking to his track record.

As usual, we'll go through this group by group. And starting with Macquarie Asset Management. As we said, excluding the divestment of the public investments businesses outside of Australia, we're expecting the base fees to be broadly in line. But the net other operating income, we're now expecting to be significantly up, and that's driven by the performance fees that Alex just spoke about.

In Banking and Financial Services, as you can see, we're having ongoing growth in the loan portfolio to deposits, the funds on platform, but it's continuing to be impacted by market dynamics and our portfolio mix, which is driving lower margins. And as Alex showed you, there's continued investment in our digital platform and technology investment happening there.

Then Macquarie Capital, we're saying we expect transaction activity for the full year to be broadly in line. The investment-related income, we expect to be up and that's supported by the private credit portfolio growth and also asset realizations that we expect in the second half of this financial year, and we'll continue to deploy in our private credit portfolio.

And then in Commodities and Global Markets, as we said, we now expect the commodities income to be broadly in line, but we expect continued contribution from asset finance and financial markets as has been the case for many, many years. And then our corporate results, we expect our compensation ratio and our effective tax rate to be broadly in line with historical levels. And this is subject to, as usual, the health warning of the range of factors that in the short term can affect things, market conditions like economic conditions, inflation, interest rates, volatility events, geopolitical events all playing out, the completion of transactions and period-end reviews, the geographic composition of our income and the FX implications and potential tax and regulatory changes or uncertainties.

And that's why we've always maintained our cautious stance with our conservative approach to funding capital liquidity that allows us to respond through changing environments.

Over the medium term, as usual, we think we're well positioned to deliver superior performance given our deep expertise across 4 very diverse capabilities in our operating groups, supported by our ongoing investment across our operating platform, our strong and proven risk management framework and culture, our strong and conservative balance sheet and funding and within that risk our approach to patient adjacent growth into new areas, adjacent areas.

Now the last thing I'll do is touch on our returns over this period and over the historical period before handing back to Sam for questions. And as you can see, we've had a 14% ROE over the last 19 years. and this year delivered 9.6% in the half year. The Macquarie Asset Management and Banking and Financial Services that have historically delivered an average of 21% delivered 20% again in this half. The Commodities and Financial Markets business, Commodities and Global Markets, I should say, in Macquarie Capital, which have delivered 17% average over past years were 12% in this half. And we talked about the big investment we're doing in platform in CGM. Also the capital requirements in that business high at the moment and up a bit in this half as well given what happened in terms of FX rates, gold prices, et cetera, we held slightly higher capital.

So with that, I will hand back to Sam to take any questions you may have. Thanks.

Great. Thank you, Shemara. So we'll start with questions in the room, and then we'll go to the line. So I'll start with Matt Dunger at the middle there.

Matt Dunger from Bank of America. Shemara, I was wondering if you could expand on the comments you made earlier around the transfer of the green investments from MAM into Corporate, the rationale, why now? And on a related matter, Ben's seeing strong green investment fundraising. How is the demand for these assets?

Yes. And Ben is here in the front row. So I might let you, Ben, in a moment, just comment on how the fiduciary business is going, where we're seeing very good momentum in many channels. But that segues to why we have brought these assets into the center because there's a limited number of assets now left, and we want the team and the asset manager focused on building the fiduciary business. So we've done this before with assets like, say, Sydney Airport, we managed in the center, the building behind us 39 Martin Place, we managed in the center.

The team that have been working on that who are a lean team with deep expertise in these assets, have now moved over into the center. We're very well familiar with these. And so we expect that we'll use our resource better by doing that. And then Ben, did you want to comment on how the fiduciary business is going? We'll get your microphone.

Thank you for the question. In terms of MAM's green business, it's grown 5x in terms of assets under management over the last 3 years. It's sitting just under $30 billion of assets under management now. The appetite for clients for those strategies remain strong. As you would have seen in the media earlier this year, we actually had our largest ever fund commitment for MGECO, our core renewables fund from ART, which was just in excess of AUD 1 billion. So I think that's a good indication of the support we're seeing for both our solutions and strategies, but also the support from institutional investors around the world.

We've now expanded the distribution of those products into the wealth segment. That's also going well. And then in terms of just finding ways to match that capital with opportunities, you probably saw that our dry powder 18 months ago has come down from the sort of the mid-30s to the low 20s, a good example of the fact that we are finding around the world good deployment opportunities, generally speaking, and that includes in energy transition or decarbonization, and that's driven by just the fact that the world needs more power than ever before.

The most affordable scale power to install is obviously solar -- and so those opportunities around the main markets, about 25 markets that we focus on remain very significant, and that's then extending into things like storage and the like. So I think we see decarbonization as being one of our 4 major mega themes for MAM, and we see the opportunity set as still being very significant and if not growing.

And perhaps one for Alex on the CGM side and the $200 million step-up in costs there. Just thank you for unpacking those drivers. But just wondering if you could talk to us about how much you expect to recur into the next period. Obviously, the Scottish meters seem to be one-off, but how much of the remediation is the next period?

Yes. Thanks, Matt. Yes, as I said, in terms of the step-up in the cost base, it's a combination of 3 things, just to sort of repeat. So it's high grading the platform, so investing heavily in the data and the technology that supports Simon's business on a global basis. There's obviously some remediation effort going in there, particularly in relation to things like the license conditions we have associated with our OTC derivative reporting. So that's certainly some costs associated with that. And then there's some one-off costs associated with transactions and the like.

The one-off costs in terms of the step-up have sort of in the range of 20% to 30% of that step-up. So obviously, we wouldn't expect those to repeat necessarily going forward. Now the remediation programs at work, obviously staff up those programs across the group. And so you'd expect, Matt, in a few periods, those would roll off. And obviously, the high grading of the platform, we'd expect to maintain going forward. So hopefully, that gives you a sense of what we think is going to happen at least in the short, medium term.

And I should say briefly because we are focusing a lot on the green assets now, that portfolio, we think, warrants focus in terms of getting the best value out of it if time goes into it. And it's diverting the attention of the MAM teams who are trying to raise money and look after their investors, whereas we have a lot of time on our hands to work with. It's a very good team that have been working on that, but we -- focus -- yes, thanks Alex, good stuff.

I'll go to Jon first, and then Andrew, or maybe...

Jon Mott from Barrenjoey. A follow-up question on the green assets and specifically Corio and Cero. Can you just give us a bit more on the amount of capital tied up and specifically between how much is in solar and how much is in wind?

So of the $1.2 billion, obviously, there's a lot more concern about offshore wind than there is about solar. So they're there. How much have they been marked? So there's debt in there as well, I'm sure. So what's the asset mark that's been taken down on that? And are they salable? Are these assets that there is demand for? Or are we going to see further impairments over time just given that offshore wind, in particular, is on the nose and you've seen Orsted and others come under significant pressure?

Yes. I'll answer briefly and then I'll let Alexander tell you more about the detail. But basically, the biggest of the assets is the Cero portfolio, that's solar assets. And solar is an area where we're seeing still good interest. The MAM team will attest to that. But it is a development platform, and that's why we thought it was good to bring it into the center and focus on it because we need to focus on OpEx and DevEx as we develop that and the timing that's optimum to exit it to get the best return for shareholders.

We have actually made impairments in this first half, and we can give more details, but it's principally been in offshore wind in the Americas is where we've seen challenges in the sector. Elsewhere, we're at $2 trillion of investment now this last year in green assets. So there is growth.

So I think that's a brief summary about of the $1.2 billion. The biggest thing is the Cero. Corio is a group of offshore assets, limited in the Americas, and we've taken a provision there, but we have some in the U.K. region. We have some in Taiwan. We have some in Korea, and we're managing that asset by asset.

Yes. Maybe just to add just a couple of things from me. So just in terms of the split, about 3/4 is solar and about 1/4 is wind or 25% wind, 30% wind, somewhere. So it's majority solar. Just in terms of the -- a few things to observe. So firstly, the solar market, just picking up Ben's point, the solar market is obviously quite different to the wind market. Solar, I think, it remains the case that solar is the lowest levelized cost of energy. And so it's also relatively quick to develop and take from development stage to operational stage. And so we continue to be pretty optimistic about the solar exposure across the group. So that's the first thing.

The second thing on the wind story, a little bit region-specific, Jon. I mean in the U.K., for the sake of the example, the wind market continues to be a, an important source of power, but b, a market that the government continues to respond to changes in the cost of capital associated with the development and the time frames to develop. So you probably saw in recent times, the most recent contract of difference has gone up from GBP 72 a megawatt hour to GBP 81 a megawatt hour. So you're seeing the market -- you've seen the government respond with the subsidies. So U.K., a little bit different to the U.S.

I think in the context of the U.S. for obvious reasons, it feels like -- at least it felt like to us that with the passage of the last 6 months, which is obviously where we've been focused, it felt like to us that the time frame and the risk associated with developing offshore wind assets in the U.S. meant that it was an appropriate time to look at the carrying value of that asset. And so as Shemara said, we reduced or Shem said, we reduced the -- we reduced the carrying value of those assets down. It was about $150 million impairment that came through, but that was largely related to wind.

I mean just to sort of complete the picture, bear in mind with all these things, 2 things. Firstly, we expense a lot through the P&L in any case. So we sort of buy down our exposure to these assets. And we don't obviously remark those assets to market. And so when we're impairing the assets, we're obviously impairing it from a low cost base. And so at the time we make the judgment at 30 September, we obviously feel like the carrying value of the assets we've got left on the balance sheet is appropriate, but we'll continue to review that going forward.

And just the second question probably for Ben in front of me. Raisings in the sort of the MAM space, I think, were $10.7 billion. We've seen some really enormous funds being raised by some of your competitors. I just wanted to get a feel for whether you're comfortable with that $10.7 billion in the scheme of some of the other funds being raised.

And whether you can break it down because I know when we were in the U.S. a couple of years ago, there was a big push to get into the U.S. high net worth market and private markets there. How much of the money is now coming from that channel as compared to the big industry funds and institutional money?

So first of all, yes, we are comfortable with those fundraisers. We raise funds that meet our business model. We have various regional funds that we constantly have funds in the market to service clients up and down the risk curve and by different geographies. And so we think that model is working very well. I mean, we've just completed the largest exit ever out of one of those funds in the U.S. for Aligned Data Centers. I think that's a good example of what we do.

We don't buy $40 billion companies. We build $40 billion companies, and then we return that capital with alpha to clients in a timely fashion. And so we're very focused on doing the things that we're good at in MAM, which is being an asset creator, being an alpha generator, and that allows us to provide solutions to a broad client mix. And you're right, increasingly, that's allowing us to take those solutions from our traditional client base, which is institutional clients into the wealth and also into the reinsurance channel. And we're starting to see a meaningful pickup in terms of those contributions.

So I think over the last 12 months, wealth has contributed just in excess of about $1 billion of fundraising, and we can see that -- and that's with only 2 funds out in the marketplace.

We have a third one coming out, and that will sort of be our full suite of infrastructure or real asset-related products, both on the equity and the credit side. And we'll then obviously continue to work on partnering with more wealth partners to have those into the marketplace. And I suppose as we've spoken before, Jon, the big difference is that 24 months ago, we had 2 wealth partners.

And today, we have 15. So I think a good example of not just the appetite of the wealth market for what we do, but also just our ability to increasingly get into those channels. And that will pick up over time. It's still very early days, I think, for all players distributing to the wealth market.

Great. So we're going to Andrew just at the front again.

Andrew Triggs from JPMorgan. If I look at consensus expectations for performance fees, about $3 billion over the next 3 years, which I think roughly equates to probably 50 bps of AUM, which you've talked about over time. Just noting that you've just delivered sort of over $700 million for the half with a lumpy fee from Aligned co-investors, can you just give us a sense of your thoughts versus what could come through in the next few years, noting that MIP IV and MIP V haven't realized there is still performance fees coming through from MAIF2 and there's a number of other assets in various funds. Can you just talk to the broad sort of outlook versus what the market is thinking?

Sure. And I'm happy to give a few comments and Ben can elaborate. But the 50 bps we gave was an average through time, and there will be points at which it's a bit lower points at which it's higher depending on where in their life cycle the funds are. So the funds that have just realized the MIP IVs, et cetera, getting to 8 years old. And so those funds are getting towards end of life, but they're whole of fund performance fees.

So even though we may have a big realization early in the life of the fund, we have to look at what it generates over the entire portfolio before we start booking those fees. So I think we stick with the 50 bps through the cycle. And Ben can elaborate if you want with a bit more color on what the recent realizations mean for the particular funds they're in. But generally, we'd be saying 50 bps through the cycle.

Yes. I don't really have much to add. Shemara is right. I think we feel very comfortable with the 50 bps as a rule of thumb. Clearly, this half has been higher than that. We've got MIP IV and MIP V, which will benefit from -- over the coming years from the Aligned exit, but also exits in other areas. We have other digital infrastructure and other broader infrastructure assets that are high quality and will be sold down appropriately into the market as we see that opportunity. And it's the same for something like MAIF2, where we had a very good outcome on AirTrunk.

We've also sold our industrial gas business recently in Korea and have very strong multiple, and we continue to have good portfolios of assets right around the world that there is a big demand for. And that's one of the things that I think we will benefit from over the years in sense that the vast majority of investments we do are manufactured by our teams on a bilateral basis.

But as more capital grows and looks to be deployed, there's a deeper market of buyers for these assets and high-quality assets. And so again, it comes back to that business model of really being able to create assets and build them to scale and then sell them into the market when there's potentially both a better owner for that -- but just as importantly, doing our job, which is not just to make investments, it's actually to exit businesses and return capital to clients, which is not something that seems to be talked about as much as you would expect.

Second question, perhaps on CGM. Just expectations for commodities income into the second half guidance has obviously been downgraded, which is understandable given the first half performance. I do think -- I do understand that April was fairly anomalous trading in the CGM business. So it does imply, and you saw that in the AGM update. So Q2 looked a lot better. Can you just talk to some of the trends you're seeing and sort of inventory positioning, I guess, heading into the key second half period?

Yes. And I'll let Simon elaborate. But generally, you'll have seen from all our commodities peers that it's been a much more subdued external environment in terms of volatility and whether that is from other banks who don't have as large a position in commodities, but the trading houses, the hedge funds, the energy companies have all said it's been a more subdued environment. Despite that, as I said, generally, the revenues are holding up in CGM. But Simon, did you want to elaborate a bit?

Thanks, Shemara. Thanks for the question. You're right. The first quarter was more challenged for obvious reasons with geopolitical factors. We've seen some normalization to trading. But what you -- we're all desperately aware of, we think about all commodity markets, prices have been lower generally across the commodity spectrum, but also volatility much lower. And obviously, we've talked in the past about the competitive tension. There is more risk capital and more competitors.

And so as Shemara just alluded to, most of our trade house peers and hedge fund peers are actually really struggling as we've seen those announcements. We've actually had a pretty good run of it in the last -- in the past second quarter.

The outlook for the next year is we are market dependent. All the optionality that we have in the business remains. The second half generally in the past has been strong, but the past is no indication of the future. We are market dependent on what happens with the Northern Hemisphere winter and the demand. But we are similarly positioned. What has been pleasing for the business and what we're seeing increasingly is the client numbers are building. The amount of financing we're doing in that sector is also growing.

And the build on our strategy into new markets, things like batteries and LNG continue to gain pace. So that's positioning us well for the future. So again, clients are good, but we'll be subject to market volatility and market opportunities.

And the other thing briefly in CGM is the financial markets and asset finance underlying cash flows are growing a lot, especially, I think, more recently, the cross-sell into the MacCap clients, et cetera.

In CGM, we're obviously, originally diverse and balanced portfolio of businesses. On the financial market side, as Alex ran through, we continue to see strong growth. And that's very much more a client-centric focus, less market risk. And as a result, regardless of volatility, regardless of market prices, it continues to grow, albeit it would have grown more if there was more volatility and more higher prices. But it's a steady state, and we continue to see growth, particularly in financing, but in client solutions. So that's really encourages and underpins the business for the future.

We'll go to Andrei in the middle there, please.

Andrei Stadnik here from Morgan Stanley. Can I ask my first question around appetite for growth in private markets asset management? Where would you like to grow? And to what extent would you consider inorganic growth options?

Yes. And again, Ben, you might want to comment on this, but we started in infrastructure as our specialist asset class and then have grown into adjacent areas. And we would like to, as Ben was explaining, patiently adjacently keep growing into private credit, real estate, agriculture, which we've built capability in. But now we're doing infrastructure like private equity that we started raising in -- so I think it goes to the point Ben said is we look at where do we have the specialist expertise to deliver alpha and then patiently adjacently grow along that lines.

Now having said that, we always look at inorganic growth. We certainly have done a lot in the public investments. We've also GLL, CPG done investments inorganically in Macquarie Asset Management as well. And we're very disciplined about making sure there's accretion, not just over the medium term, but quite soon when we invest, but we do keep an eye on that as well.

Yes. MAM is a disciplined allocator of capital. Our business is a J-curve business. In asset management, generally speaking, it takes 5 to 8 years for any new solution or vintage to really get to scale. I think as you'd be aware, over the last 5 years, MAM has made several investments, whether it's moving into adjacent PE adjacent infrastructure, whether it's moving into opportunistic real estate, expanding our private credit offering, particularly around real estate or to do high-yielding funds, moving obviously into energy transition, but also building a reinsurer.

And over the last sort of 12 months, we started to see the J-curve of those business start to sort of grow and move in the right direction to augment our core businesses. So I think our first focus is always how do we, in a disciplined and patient way, allocate capital to grow businesses organically because that ultimately gets the best returns for shareholders.

Equally, if we can find something that may accelerate us from an inorganic point of view, we'll look at that and review that. But I suppose our initial priority is to really back our teams with time and capital and resources to grow businesses because we've got that track record, and that's the most efficient and effective way to do it for shareholders.

For my second question, can I ask around private credit. And it's a broad-ranging question in the sense that there have been some concerns around U.S. private credit exposures recently, and it's interesting that Macquarie Capital paused growth in its book. It didn't grow. It was flat at $26 billion. Can you talk a little bit about that? And also that joint initiative between MAM and Macquarie Capital to bring more co-investments? Can you also maybe explain a little bit about how that's progressing?

Yes. And I think if I read that correctly, there's 2 questions on the quality of the credit book and what returns we're getting and then how do we grow it. And I think what we do in that credit book, you're talking about in Macquarie Capital is mid-market direct lending that we've been doing for over a decade now and growing it very patiently in a very disciplined way, also importantly, through many, many market cycles because we haven't had a recent correction in the credit cycle.

Globally, the private credit world has grown to about $2 trillion out of a $300 trillion pool of lending there is through banks, insurers, et cetera, and financial market channels. So it's not a huge proportion yet of the total credit. It's been growing fast and into areas that are higher risk, higher return. So we've had a few challenges, but we haven't had a big credit cycle yet.

And the challenges we've had are quite idiosyncratic. Indeed, the first brands in the tricolor were bank-led ones, not private credit-led ones. But there'll be the odd error. We have had a very low loss ratio through multiple cycles. I think it's 0.1% per annum, 10 basis points per annum. So we're really comfortable with the credit quality. But in terms of the growth of that book, the concentration is the challenge for Macquarie Group. So we're getting into the mid-$20 billion.

And our view is at that point in terms of concentration of Macquarie's portfolio, we got to the point where our allocation was slowing, and we started bringing co-investments from some of our large global investors who have been very happy to access it, but we thought the next stage of growth makes sense is a partnership between MacCap and MAM to bring in fiduciary money alongside the strategy. So I might -- because Ben has spoken quite a bit, let Michael Silverton just elaborate on performance and growth from here.

Yes. Thanks, Andrei. We've invested close to $80 billion in private credit since 2009. In terms of what we're seeing, we feel very comfortable in terms of the performance of our portfolio and credit quality. And as we've said in the past, close to 90% of the portfolio is first lien corporate and real estate credit.

The first brand situation was a syndicated deal that came to market very quickly. We can't comment on that, but what we can say is our due diligence process in terms of deals is very intense, and we re-underwrite these transactions as we go. So we feel good about the portfolio.

In terms of growth, we do have partnerships, including with MAM in Europe and the U.S. And during the period, we actually partnered on around $600 million into those vehicles. So that's in part a start to that process of bringing in partners alongside the balance sheet.

I might have...

And I think we'll -- just quickly that we'll grow these funds, early funds slowly and make sure the investors have a good experience. And then as Ben was talking about, that J-curve is they'll probably get bigger, but we want the first European and North American fund to be a really happy experience and then on that track record.

I mean I'll just add just a couple of things, Andrei, just to the discipline point that Michael is talking about and some of this we've spoken about before. But the first half, the team looked at about 800 deals, I think, did about 40. So there's obviously a huge amount of deal flow there, and that allows them to be selective.

And it's a bit like the story that Ben is selling on the MAM side. Obviously, if you've been in the sector for a long period of time, you should see a lot of transactions. You've got experienced deal executives out there finding the better deals rather than, you know the [auto-ran] deals or the deals that everyone else is doing. So that's one point to think about.

The second point is that, again, to the discipline, interesting, if you went back maybe 3 years ago, you would have said half the book was exposed to the U.S., 40% in Europe and 10% down here, roughly. Today, that split is more like 55%, 56% in Europe, I think 40% in the U.S. and whatever the balance is here. And I think that reflects the fact that the team, a, are seeing better origination opportunities with more attractive terms, not just in terms of margin, but in terms of the borrower covenants or the rest of it in the European market. And so the fact that we've got a global franchise, we're obviously not trying to do everything.

We don't feel like we need to do everything. I think that's made them a disciplined investor, and we're seeing the benefit of that over time.

And then the other thing I'd say to the loss point, obviously, we still hold 2.2%, 2.3% ECL against the book. So we're well covered from an ECL viewpoint. And we obviously hold initial issue discount as well. So we feel like we hold these assets at a fairly attractive net position. So yes, there'll be -- as Shem said, there'll be idiosyncratic issues. There have been idiosyncratic issues along the way. But generally speaking, I think the experience the team has got us in good stead.

Great. Ed, just in the second row there, please.

The first one, just circling back to CGM. You've talked about the subdued market conditions, but you also talked about investing in the platform and around regulatory expense and stuff like that. Can you just touch on, I guess, your risk limits and how you think about that versus peers with the investment on the regulatory side?

Is that pulling back growth that you thought you potentially could have going forward? Has the growth rate in that business slowed from what you would have thought it would have been a few years ago with the changes you're putting through the business? And can you just talk a little bit more about the opportunities in that business, please?

Yes. And again, I might let Simon and Andrew Cassidy comment. But basically, what I would say is we're not -- we have financial risk and nonfinancial risk, and we're looking at credit market risk, et cetera, with well-established approaches and strong performance there and are empowering teams to go and look for adjacent opportunities. What we're focusing on a lot more now is the nonfinancial risks, which include operational risks, but also regulatory and compliance risks.

And we're investing in our operating platform to free up the business to go to an even bigger stage of growth where in BFS, and Greg can talk about this at some point, hopefully, but we have done an incredible job in bringing data under governance, using technology, the operational risk management is incredible as well as the service to the customers. But that's 3 products in one market here.

In CGM, we have, Simon, somewhere between 97 or in the low 100s of products in 31 geographies. And we're trying to bring discipline around trade capture, operating platforms, et cetera, so that we can manage nonfinancial risk as that business continues to go to even greater scale. So I think that's what I'd say in terms of growth versus balancing the investment. And you and Andrew may want to talk about -- I know you're doing a lot of work on how we maintain agility while managing risk.

Sure. Well, I'll go first and pass to Andrew. When we think about risk, there are 3 types of risk for us. There is actually market risk, credit risk and then nonfinancial risk. So we assess all of those in terms of where we think the business is today and where we think it should be in the future. As Shemara alluded to, we have been very deliberate in setting our medium-term strategy about where we see that business. And so what we've done is -- and as we've talked about over the years, we are a client-centric business. That's our benchmark of where we start our business. We see that in the client growth in terms of numbers. So we're continuing to do that.

We're continuing to look at where those -- that growth has been and what the opportunities are in the future. We've talked a bit about LNG, batteries, et cetera. And so in terms of where we have appetite for growth in partnership with Andrew and his team, we have been deliberate in deciding on where we want that growth to be. We have the appetite that we need to grow. And we've been doing that. You would have seen our capital numbers ticking up. A part of that is as a result of that growth strategy now in play. And what we've seen is going into new markets, going into new products, we've diverted resources to those. And so we're building for that future.

In terms of market risk, we're well within appetite. Even now, obviously, it's quiet, but the opportunities we see going forward, we're well positioned. The optionality is still there. But that optionality is really there as a dependency upon our underlying franchise in clients. So we would only ever increase market risk appetite if we had a sustained growth in our client numbers to support it.

But all of this has to be measured to help you evolve the platform for scale. So our nonfinancial risk appetite is very important at the moment. So as Alex talked about, we are investing in the platform for that scalability, for that strategy very much with that nonfinancial risk appetite in mind. Andrew?

I probably don't have a lot to add, Simon, other than, I guess, just to reiterate that point that we are spending money in Simon's business on investing in data, investing in tech, getting our architecture right. And of course, that's so that we can ensure we're meeting our obligations today right across the range of businesses and regulators that we deal with globally with Simon's business, but also to provide a scalable platform for growth.

Once you get that data right and that technology right, that will provide the scale and the platform for Simon to continue to grow according to the strategy into new markets, into new products like LNG, et cetera. So we do think that it's a necessary investment in the license to operate, but I think an important investment for the future.

Yes. And I think it's evidenced a bit in the revenue growth line. As I was mentioning earlier, we were sort of $1.7 billion 10 years ago. When I took over, we were $3.8 billion. We're doing [low 6s] now. the revenues continuing to grow because the teams are able to go out there and look for franchise and trading-related growth off the back of that franchise, but the investment is what's impacting the earnings.

Well, maybe just to follow up on that. You talked about the investment in the platform. How much more is still to go, like significant investment? I know there will always be investment in platforms, just holding back that -- the growth of the bottom line.

Yes. I think it's going to run for a couple more years in terms of the investments we're making. We're not seeing it step up materially. But Simon, again, anything you want to add to that?

A little bit earlier on, there are 2 aspects to that growth in that platform. There is the scalability and the -- I guess, basically synergizing that platform for a more global approach. We've been quite good at being opportunistic and adjacent. We've been much more deliberate about being holistic and being able to scale. That will give some efficiency in the future.

But the second part is the remediation part. And so we invest in that platform. We invest in the remediation. And so there is a line of sight to how that runs off in the future. So then we'll be back to -- we'll never be BAU without taking that into account. That's always will always be important. But we will see a steady state through a couple of halves, I would say.

And we should say, I mean, reporting end-to-end capital and liquidity on the frequency now required has meant a huge investment in data to deliver that. Once we have that done, and Alex has been leading that program across Macquarie, but ultimately, it's the upstream data that's a big driver of it. So we should see that come off once we tick that box and then there'll be the ongoing platform investment.

And then just my second question, just circling back to the green assets. Can you just give us a little bit more detail on them where they -- because you talked about strong demand for operational green assets, where they are on the operational side of it? How long is it going to take to get majority of the portfolio up to operational. So then potentially, it's a little bit more salable than where it is today on both the assets.

Yes. So let's just talk sort of in 2 component parts here, Ed. Obviously, you've got the solar platform. And as we've talked about before, if you think about the development pipeline there within the markets that we're continuing to develop, you've probably got 10 gigawatts of solar that's sort of in that development phase. And there's probably somewhere between 0.5 gigawatt and 1 gigawatt that's either operational or heading towards operational. So a nearer-term visibility on that. And so as we've said before, plainly when you've got cash flow coming out of the asset, that becomes a conversation about the discount rate to acquire and then how do you value the portfolio or the platform, the outlook for development. So I think solar is a bit easier and a bit nearer term.

And obviously, the appetite for solar assets continues to be quite strong anyway for the reasons I talked about before. I mean the reality is that the world needs more power and the shortest way is solar and solar and battery. So that's the way we see it. So we feel like there's value there.

On the wind side, the -- we're obviously at an earlier stage from a development viewpoint. Most of the assets in Europe are sort of heading towards the -- what we would describe as financial close. We start to spend significant dollars in constructing those assets. Again, the U.K. market tends to be more attractive because the feed-in tariff is more attractive or the contract for difference is more attractive.

And some of the pressures from a cost of construction viewpoint are actually coming out of that market, but they're obviously earlier stage, and they take longer to get from early-stage construction to operational stage. So typically, typically, the development cycle for a wind farm is going to be, I don't know, 8 to 10 years.

The development cycle for a solar plant is going to be, I don't know, 0.5 year to 2.5 years or something, depending on where you are in the world. So -- and then obviously, the one that's sort of most in focus has been for us thinking through over the half has been the U.S. story.

And to the point that Ben was making before, the U.S. still needs more power. But the reality is that there's quite a strong push against offshore wind. And so that was really the reason. We don't see a near-term prospect of taking that from development to operations. And so that means that you need to start to think about the carrying value for that asset.

And Ed, just going back to your previous question, I think the other thing we should point out is that we historically have sat with very big liquidity buffers, capital buffers for the way we ran the business. Now that we're required for regulatory purposes to move to being much better across our liquidity real time, once we reach that, we will actually save a lot by reducing the bigger liquidity buffers, et cetera.

Yes. I mean, hopefully, we dealt with your green question. You can follow up if there's any others. But I mean maybe just on the cost for a second. I think there's a blueprint sitting in Greg's business. I mean at the end of the day, right, Greg has a really great business. It's obviously a smaller set of products than what Simon is sitting on. But at the end of the day, it's based on our digital capability -- it's based on data, it's based on automation, it's based on technology, and it's based on a great customer proposition.

What Simon's business has got is a great customer proposition. You can see that continuing to grow over the last 7 or 8 years. That's resulted in a doubling of revenue from '19 to this point. But what we're trying to do, and I think what the team is making progress on is actually thinking about the foundations of the scaffolding that supports that. And a lot of the same lessons and observations that Greg and the team have apply to Simon's business.

And obviously, once you get to a point where you've got your data asset in good shape, you've removed manual process, you're using more technology, you're blending different data from different sources for insight to customers. That's a huge opportunity to drive efficiency into the future. What we are -- where we are at the moment, obviously, is the point we're investing to get to that level of scale. But you can see the blueprint sitting in the front row on my left there. And the cost to income advantage on the technology side becomes really significant.

I was going to say Greg and the team are leaning in and working with Simon and the team to share those lessons of how they delivered that in BFS. So hopefully, we'll get the benefit...

Shipping a barrel of oil won't be the same necessarily writing mortgage, but it's got some characteristics.

Right. We've got a couple of questions on the line. I think we're done in the room. So if we go to the lines, please.

No questions on the line. I think we've got 2 questions on the line. If we can have those, please.

Your first question comes from Matthew Wilson with Jarden.

Matt Wilson, Jarden. Firstly, Alex, all the very best. You'll be missed as a CFO. It's been a pleasure dealing with you.

Thanks, Matt.

And over to the questions. I wonder if you could talk through, perhaps this might be one for Ben Way, the type of blockchain, stablecoin infrastructure investments that you may have. Your front and center global activity, more is happening globally than it's happening here. How do you see the tokenization of assets and securities, alternatives for deposits and payments playing out globally?

Can we turn to Ben...

I must have worn it out, apologies. We don't -- so I think the first answer is we don't have any investments in stablecoin or blockchain as an asset manager today. But do you see the ultimate tokenization, particularly in the wealth channels of asset management, that's certainly coming. And I think that's certainly part of what is often banded around the industry is the democratization, particularly of private markets where we can give different types of clients that have not normally had access, particularly wealth and retail clients access to that private market.

And I think the best example is probably the way the U.S. is looking at 401(k) and reforming that and giving access, giving those pools of capital the ability to invest into private markets. And clearly, you'll need some sort of tokenization mechanism to do that, just given the types of capital you'll get and the size of capital you'll have and what you'd be matching within private markets. So that's certainly something that we're looking at very closely. We're working with our wealth partners to see how we can use tokenization, but it's not something that's currently present in our portfolio or something that we're doing.

Okay. Thank you, Benjamin.

Go ahead, Matt.

Hello?

Yes, we can hear you, Matt.

I assume, perhaps you can add to how you see this thematic playing out. You've been very good at picking up early-stage investments. It's clearly moving offshore.

Are we investing to that thematic? I think in the digitization thematic at the moment with infrastructure, we obviously went early with data centers, but we're very conscious that there's a lot of other infrastructure to support this fiber optic networks, towers, subsea cables. So I think the teams are working on those. And we have a portfolio still of data centers left, but we also have a lot of fiber investments around the world, et cetera. So I think we're going more that stage than doing the infrastructure for the crypto. Is that fair enough, Ben?

That is true. So we continue to break apart the -- or break down, I should say, the digital thematic and look at where we can be a good and prudent investor in that. We've done that traditionally in things like towers, into fiber. We do that into data centers. We do that into different types of data centers, both hyperscale and sub-hyperscale. You may have seen that in the last few months, we've reinvested into data center platforms in the U.S. through our investment in Applied Data centers, which is focused specifically on AI data centers. So we continue to look at that opportunity. But we also look at coming at that thematic from different angles.

Our industrial gas business that we sold in Korea recently was really a business that was primarily focused on supporting semiconductor manufacturers. Clearly, that's geared to the digital economy. So again, we look at where we can be a responsible and effective investor right across that thematic. And those opportunities will continue to change as the world further digitizes and as we need different types of both technology, but also the infrastructure to support that.

Your next question comes from Brendan Sproules with Goldman Sachs.

Brendan from Goldman. My first question is on Macquarie Capital. A very strong results around transaction volumes and the resultant fee and commission income. I noticed in your outlook that you haven't changed the outlook. You still expect it to be broadly in line for the full year. Could you maybe talk about what you're expecting to see around transaction activity in the second half?

Yes, we will let Michael, go straight to that.

Thanks, Brendan. We have seen, obviously, transaction value increased quite a lot in the M&A market, up 33%, but volumes are still fairly muted. A lot of the transaction activity has been at the in the mega cap transactions where we have not been focused. Now we were -- in the first half, we had several deals that closed that were larger fee events and that has supported the result in the first half. But in the second half, looking at our pipeline, it looks very solid, but we don't have the same number of large deals looking to close.

With that said, the actual commercial approvals of transactions and NDAs that we're signing are as high as they've been since 2022, which is encouraging. But many of those transactions we're working on will probably close in '27. So we just expect we're not going to have as many large fee events in the second half, which is why we have that outlook.

That's very clear. My second question, and Michael, while you got the floor, I just want to ask you about the equity realizations. I mean you've indicated that you expect to see more of these in the second half. But I did notice in this half's result, we had a kickup in net losses from associates and JVs. Just wonder how much they will also impact the overall performance in the second half?

They will not meaningfully impact the second half. That's an accounting treatment on deconsolidation when a particular transaction we've merged with another company, and that's an accounting treatment on a single asset. So we would not see that as a trend. And in terms of the realizations, we're working hard on them as we always do. We've got about 100 positions. It's -- we'll sell them when the time is right, but the good news is that we have a number of assets in the market. As Ben mentioned before, there's good demand for good assets, and we'll continue to work hard on those. And hopefully, some of those will come through in the second half.

Your next question comes from Tom Strong with Citi.

I just wanted to follow up on the questions around CGM. If we look at the half results, the business has done well to hold the net operating income, but with the cost up 10%, and there's about $1.5 billion more capital that's gone into the business year-on-year.

So the drag on the group ROE continues to increase. How should we think about the pathway to better ROEs over the long run? Is it through better operating leverage from the more scalable platform that you've talked to? Or is there a capital efficiency you can get out of the business? Or is it a combination of all of the above?

Again, we'll let Simon comment. We had a slight spike, obviously, for one-off things like exchange rates in this half. But do you want to comment more medium term?

Yes, sure. Look, it's basically capital is up probably in 12 months, about 20%. And it's basically split into 2 halves. Half of that is through business growth through the strategy, which is accretive to P&L, which we're starting to see those grassroots, which is really pleasing, and that will continue to be the case.

So as we invest in the business, as we grow the business in line with the strategy, we will use more capital, but it will be returning. And the types of things we are investing in will be accretive now, but also we'll be planning for the future. So there might be a slight drag on that, but that's not the main game.

The other half of the capital growth has largely been through market moves. So we will have seen the weakening in the U.S. dollar in the first 6 months of this year, but also the very strong rally in the precious markets in gold. And so as you know, we're a very client-centric business. And so lots of client exposures, lots of credit risk exposures, which is a drag on the capital.

And you think about how long that lasts for, there will be a period of time whilst those exposures run down as they naturally amortize and as they'll restructure with those typical types of deals that we do. So we think there is a path to the reduction in that -- that half of the capital through time as markets move around, but also as those exposures amortize. But also, we'll start to see more revenue accretion on the growth side of the capital.

Yes. Maybe, Tom, it's Alex. Maybe just to add a couple of things for me to the point that Simon is making. Obviously, some of it is timing related. So you expect that to roll off and then we'll reset the basis, which will help from a capital viewpoint.

The other thing you probably saw during the half, we obviously moved the North American Gas & Power business from the bank to the nonbank. That's a reflection of the importance that Simon and the team see LNG playing in the energy mix going forward, but also the fact that, that business requires a physical footprint, which is more consistent with what we've done in the nonbank and longer-dated contracts, which are better, I think, from a risk sensitive viewpoint from a capital against those exposures, much better positioned in the nonbank.

So short term, obviously, the impact of that from a capital viewpoint has been relatively small, relatively immaterial. But as Simon and the team grow the exposure to LNG over the course of the coming years, that's a much more capital-efficient place to look at doing that business.

So we're obviously -- to your broader question, what we're trying to do is continue to grow the revenue line. You're seeing that tick up with the customer base to the point that Simon is making before. We're trying to create a platform that's got the scaffolding to be scalable.

We're obviously -- you get some short-term noise in the capital footprint just because of some market movements that Simon talked about. And we're trying to be strategic about where you actually house the business so that it's best positioned to be able to service the customer base going forward.

Your next question comes from Brian Johnson with MST.

I have 2 questions. First one, I'd like to address to Mr. Silverton, if I may. Michael, we know that the profit recognition in the private credit book is very back-ended. Can you just talk to us about this prospect of it kind of like capping out? When do we actually see the profit recognition come through from that?

And then can I also just get a feel just about these private equity investment realizations that you've got in that MacCap. Can we just get a feel to whether you're still confident about the long-term kind of return dynamics that we've spoken about on the European trip? And also just the timing beyond this year of those realizations?

So in terms of the word J-curve was used before the term J-curve. What we experienced, Brian, as we were scaling the private credit portfolio is that we would take upfront ECL and that may have suppressed the earnings coming from those loans. Now that we are at scale at the $25 billion, I think the earnings reflect the portfolio. And now it's a question of performance. We have the ECLs that Alex referenced before held against the portfolio and unamortized fees of around 1.5% also.

But I would say that where we're at, at the moment is run rating the portfolio at its current size. So if we can continue to grow the portfolio, we'll see some further upfront ECLs, but these are 3-year weighted average life loans. And I think when it's scaled, the earnings reflect the earnings capacity of the portfolio.

On the principal equity book, we've got $2 billion in infrastructure development, $2 billion in our Principal Finance business and around $2 billion of capital in tech-related assets. We've invested heavily in the last couple of years. And as we've communicated, with our whole periods on average around 3 years and we've seen IRRs of above 20%. We see that continuing.

We do have a PPP business where we partner with governments. The activity there has been lower the last couple of years, but pleasingly, it's returning. And those commitments have much higher IRRs, and we're expecting that also to pick up in the next couple of years. So overall, we feel that the book is in very good shape and the return profile that we communicated at historical track record holds.

There are no further questions at this time. I'll now hand back to Mr. Dobson for closing remarks.

Okay. I thought Brian might have another one there. But anyway, thanks, everyone, for your support and for your interest. And as Shemara said, we look forward to catching up with you over the next couple of weeks. Thank you.