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Macquarie Group SWOT & PESTLE Analysis

ID : 529853| Dec 2017

COMPANY PROFILE -Macquarie Group

Business Sector :Banking and Financial Services

Operating Geography :Australia and NZ, Global

About Macquarie Group :

Macquarie Group Limited established in 1969 is an Australian based global financial services company. Macquarie has offices in 28 countries across the globe and employs over 14000 people. It has total assets of $A182.9 billion as on March 2017. Macquarie’s range of expertise includes financial and equity advisory, trading, portfolio management and financing and retail financial services.

Macquarie Group Revenue :

Operating income of $ A 10.36 billion - 31st March 2017 (up 2% from FY16)

Competitive Analysis of Macquarie Group

SWOT
PESTLE
The SWOT analysis for Macquarie Group is given below:
Strengths
Weaknesses
1. Diversified business portfolio across financial services segments
2. Strong business performance in FY17
3. Transparency and corporate governance
1. Pressure on credit ratings
Opportunities
Threats
1. Opportunities in financial services segment
2. Improving global markets to increase demand for banking and financial services
3. Geographical expansion in developing economies
1. Frauds and fines impact profitability and reputation
2. Regulatory lapses to hit the group’s bottom-line
3. Stiff competition from global and domestic players
4. Online security infiltration's and malware attacks
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Detailed SWOT Analysis of Macquarie Group

Strength

1) Diversified business portfolio across financial services segments: Macquarie Group has a diversified portfolio which helps its revenues to keep afloat even during tough economic times. Improved trading conditions, regular earnings from businesses in currencies, commodities, and fixed income securities. Higher deposits and loan volumes in the Banking and Financial Services also help to keep the business alive for Macquarie group. It’s also looking for organic growth and diversification of existing businesses in the medium term. One of the key business strategies is to focus on medium term than very long term. Macquarie strives to give best service to clients, takes a conservative approach to risk management, and focuses on evolution and growth by diversifying business and geographies. It aims at tackling problems at the operational level through an established risk management framework and culture.

2) Strong business performance in FY17: The financial year ending March 2017 saw the group net profit at $A 2,217 million up 7.5% year-on-year. The annuity businesses of the group Macquarie Asset Management, Corporate and Asset Finance and Banking and Financial Services showed stellar performance with record profits contributed by volume growth and fees based income. The overall group operating income stood at $A 10,364 million. International business accounted for 63% of the total operating income, a decrease of 5% from the previous year, mainly due to fluctuations in GBP. The group has a lot of cash and liquid assets which show its strength to meet operational needs as well as sudden unforeseen cash demands. It remains well capitalised with APRA Basel III Group capital of $A 18.7 billion as of 31st March 2017, a surplus of $A 5.5 billion.

3) Transparency and corporate governance: Macquarie Group aims to be profitable but not at the cost of shareholders. It does ensure a strong corporate governance at the top to safeguard shareholders’ expectations. The Board of Directors has 10 members of which three are females. The Group also enforces a strict Code of Conduct across all businesses along with a Trading Policy and Anti-Bribery and Corruption Framework. All these policies are in place to ensure that the company runs smoothly without unnecessary hassles of corruption, money laundering, malpractices etc. and thus gaining the trust of its shareholders.

Weakness

This section is available in the 'Complete Report' on purchase.

Opportunity

This section is available in the 'Complete Report' on purchase.

Threat

1) Frauds and fines impact profitability and reputation: Financial institutions should be wary of irregular lending, lack of proper due diligence and frauds which may impact the reputation of the business and make it liable to pay heavy penalties. The United States, Securities and Exchange Commission (SEC) fined Macquarie Capital US$ 15 million in 2015 for backing a US-share sale of a Chinese coalminer even after finding irregularities. Also in another case, Michael Roth, a former Macquarie Bank manager was convicted recently of defrauding the bank to the tune of more than a million dollars.

2) Regulatory lapses to hit the group’s bottom-line: Macquarie Equities Limited (MEL) is under enforceable undertaking after Australian Securities and Investments Commission (ASIC) found a number of irregularities and systematic compliance deficiencies it its business since 2013. Macquarie Equities had to appoint KMPG as an independent expert which would oversee the compliance restructuring over the next two years. These additional costs would impact the company’s bottom-line.

3) Stiff competition from global and domestic players: The big American financial services companies like Citigroup, JP Morgan Chase etc. and the European ones like HSBC, RBS, Credit Suisse, etc. are spreading their wings rapidly across the globe including the Asia Pacific (APAC) markets. In such a scenario, Macquarie Group does face stiff competition from both local and international players. National Bank Australia, Commonwealth bank, Westpac Banking Group, ANZ are the biggest competitors of Macquarie and are matching their offerings to that of Macquarie’s.

4) Online security infiltrations and malware attacks: Almost the whole of financial markets has gone digital and with that the risk of cyber infiltration has increased. Any compromise on the online security systems can cost the company millions of dollars apart from loss of trust of its customers. Even the installation of the best-in-class cyber security costs millions of dollars which increases the cost of doing business. Recently most of the Australian banks were impacted by Android/Spy.Agent.SI a malware which infected Android phones and stole user credentials through their banking app.

References

(1) Macquarie Annual Report 2016: http://static.macquarie.com/dafiles/Internet/mgl/global/shared/about/investors/results/2016/Macquarie_Group_FY16_Annual_Report.pdf?v=5

(2) Macquarie Annual Report 2017: http://static.macquarie.com/dafiles/Internet/mgl/global/shared/about/investors/results/2017/Macquarie-Group-FY17-Annual-Report.pdf?v=2

(3) Macquarie pays $15m to settle SEC charges: https://next.ft.com/content/7ae959fa-d496-11e4-9bfe-00144feab7de

(4) Former Macquarie Bank manager Michael Roth committed frauds: http://www.smh.com.au/nsw/former-macquarie-bank-manager-michael-roth-committed-frauds-while-feeling-unbeatable-court-told-20151023-gkgwmn.html

(5) ASIC maintains pressure on Macquarie: http://www.bankvictims.com.au/index.php/macquarie-bank/item/11625-asic-maintains-pressure-on-macquarie

(6) New Cyber Threat Hits Australia's Major Banking Apps: http://www.lifehacker.com.au/2016/03/warning-new-cyber-threat-hits-australias-major-banking-apps/

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Macquarie Group SWOT and PESTLE analysis has been conducted and reviewed by senior analysts from Barakaat Consulting.

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