Macquarie chief’s pay cut to $24m as ‘millionaires’ factory’ rakes in $3.7b

Senior Macquarie Group bankers including chief executive Shemara Wikramanayake have received a smaller share of profits in response to the corporate watchdog’s move to slap licence conditions on the bank over repeated compliance failings.

As Macquarie reported $3.7 billion in full-year profits on Friday, the investment bank known as the “millionaires’ factory” for its bumper pay packets also revealed how much it had paid its top executives.

Macquarie Group chief executive Shemara Wikramanayake said the bank’s businesses had been resilient.Credit: Max Mason-Hubers

The results came days after the Australian Securities and Investments Commission (ASIC) said it had imposed extra licence conditions on the Sydney-based bank after “multiple and significant” compliance failures in its futures and its derivatives trading areas.

Macquarie’s annual report said the board had taken into account “risk and regulatory matters” when setting pay, particularly ASIC’s licence conditions, and this had been reflected in awarding executives including Wikramanayake and the chief executive of Macquarie Bank Limited (MBL), Stuart Green, a lower profit share.

Wikramanayake’s pay for the full year dropped to $24 million, from $25.3 million the previous year, as the profit share awarded to the chief executive fell 5 per cent. Despite the lower profit share for Green, his overall pay edged up, from $5.1 million to $5.2 million.

The chair of Macquarie’s board remuneration committee, Jillian Broadbent, said the board had considered both financial factors – including the bank’s higher profits, return on equity and dividends – and non-financial factors when setting pay.

“The board takes MBL’s obligations as a licensed entity seriously and acknowledges there are areas where we can further improve compliance,” Broadbent said.

The report said that among the group’s most senior executives, total comparable key management personnel awarded profit share had increased 3 per cent to $82.3 million. Wikramanayake last year topped The Australian Financial Review’s list of the country’s highest-paid chief executives.

Macquarie’s results showed a 33 per cent rise in profit contribution in its flagship asset management business, as well as an 11 per cent rise in profits from the banking division.

Macquarie’s retail bank, which has been a fierce rival against the big four, expanded its mortgage portfolio by 19 per cent to $141.7 billion, and Wikramanayake said it planned to continue its strong growth in home loans.

Its share of mortgages is about 5.9 per cent, and Wikramanayake said it was still “tiny” in this market.

“CBA represents the economy – Macquarie represents a segment,” says Jarden analyst Matt Wilson.Credit: Paul Jeffers and Grant Turne

“The majors are all in the double digits in their percentages of market share, so we hope we can just keep going,” Wikramanayake said.

The bank has also made an aggressive play for household deposits after investing in its digital banking platform. The banking division’s deposits rose 21 per cent to $172.4 billion.

Jarden analyst Matt Wilson said he thought Macquarie could continue to expand in retail banking for years to come by targeting professional customers who tend to be lower risk, such as doctors or accountants.

“CBA represents the economy – Macquarie represents a segment,” Wilson said.

While Macquarie does not disclose the profit margins it is making in retail banking, Wilson said Macquarie’s branchless, fully digitised model gave it a cost advantage over the big four.

Profits were weaker in the commodities and global markets division due to less hedging by clients and more subdued conditions in key energy markets. Profit contribution from Macquarie’s investment banking unit, Macquarie Capital, was broadly flat.

Wikramanayake noted the volatile market environment, but said Macquarie’s various business units had remained resilient.

“Against a backdrop of ongoing market and economic uncertainty, Macquarie’s client franchises remained resilient over the past year, delivering new business origination and underlying income growth, contributing to our history of unbroken profitability,” she said.

Macquarie’s shares were 4.4 per cent higher at $204.45 in afternoon trade. Macquarie will pay out a total of $6.50 in dividends for the financial year, up from $6.40 last year.

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