Top Macquarie executives share $124m in annual remuneration

Macquarie lived up to its name as the millionaires’ factory with its top executives sharing $124m in annual pay as the bank booked a record $4.7bn profit.

Macquarie Group CEO Shemara Wikramanayake.

Macquarie’s 10 most senior executives will share a record $123.8m in remunerations after the bank reported a 56 per cent surge in annual profit to $4.7bn.

Shemara Wikramanayake, the company’s chief executive, will be handed a $25.8m pay packed this year – up 26 per cent – an increase only overshadowed by commodities and global markets boss Nick O’Kane, who will pocket $36.2m in 2022, up from $26.3m.

But Ms Wikramanayake’s was docked after the bank noted a risk issue, which it declined to detail.

Peter Warne, Macquarie’s outgoing chairman, told The Weekend Australian the issues were “not systemic and not material”.

Ms Wikramanayake added that customers were not affected.

Macquarie, announcing its full year profit to March 31 on Friday, said its standout markets-facing businesses were preparing for a challenging year, after almost all divisions across the group reported new earnings peaks in 2021 and the US crept to nearly half of the investment bank’s earnings.

The result was largely driven by volatility in energy markets and a wave of global mergers and acquisitions activity.

Macquarie Capital was the highlight, lifting its profit contribution by 269 per cent from $651m to $2.4bn, although transaction activity was expected to fall in 2023 compared to its record level last year.

Mr O’Kane’s business lifted its contribution to group profit by 50 per cent to $3.9bn.

But Macquarie expects commodities income to be “significantly down” in the next year.

Ms Wikramanayake said many of Macquarie’s regions and markets experienced heightened levels of volatility in 2022, but the group’s strategy to address key areas of unmet need was unchanged. “Over time this has seen us build deep and differentiated franchises in each of our areas of activity, all of which delivered strong outcomes and strong performance in 2022,” she said.

“Macquarie remains well-positioned to deliver superior performance in the medium term.”

The group said it would maintain a cautious stance, with a conservative approach to capital, funding and liquidity so that it was well-positioned to respond to the environment.

The combination of a subdued outlook, a big sell-off overnight on Wall Street and a robust performance leading up to the annual result saw Macquarie shares slump $15.76, or 7.8 per cent, to $186.90.

Barrenjoey Capital Partners analyst Jon Mott said the profit was ahead of market consensus by about eight per cent – but this too had been widely anticipated.

“While commodities income is likely to be significantly down in 2023, consensus should be broadly unchanged, in our view,” Mr Mott said. Macquarie avoided providing formal profit guidance.

Macquarie Group CEO Shemara Wikramanayake. Picture: NCA NewsWire / Christian Gilles

However, UBS analyst John Storey said the group was softly “guiding down” its relative performance for the first half of the current financial year, which was in line with forecasts.

Ms Wikramanayake said Macquarie was positioned for a variety of different macroeconomic outcomes, as central banks battled an inflationary surge by hiking official interest rates.

“We don’t know whether they’ll tighten very strongly and we’ll have a slowdown in global economies, or whether they’ll pull back and we’ll have stagflation,” she told analysts.

“If inflation surges some businesses will actually benefit: the asset management business typically does well in that sort of environment assuming it’s not real rates rising, and other businesses are not as impacted.

“What we try to do is set up our businesses for a whole range of outcomes; hence we sit with $10.7bn in surplus capital, we sit with term funding exceeding our term assets, and we sit with a very diverse spectrum of businesses,” she said on the call.

The group’s return on equity in 2022 was 18.7 per cent, up from 14.3 per cent in 2021. Directors declared a final, 40 per cent-franked dividend of $3.50 a share compared to $3.35 a year ago. The full-year payout was $6.22 a share.

On board moves, former Reserve Bank governor Glenn Stevens will take over as chairman from Mr Warne on Monday.

Macquarie said it had been working with the Australian Prudential Regulation Authority to strengthen the voice of its bank in the group. As part of new governance arrangements, three new bank-only non-executive directors would be added to the Macquarie Bank board.

The first, announced on Friday, was former Commonwealth Bank executive Ian Saines.

After the appointments, the MBL board would comprise Ms Wikramanayake, MBL chief executive Stuart Green and the three bank-only directors.

Remuneration committee chair Jillian Broadbent said in the annual report that the board had approved several changes to Macquarie’s remuneration framework, partly in response to a new prudential standard from APRA.

All executive directors would now be subject to malus provisions, and from 2024 Ms Wikramanayake and other key management personnel would have their retention rates reduced by 10 per cent and vesting periods shortened by two years.

Vesting periods were still long enough to “appropriately consider the time horizons of risk”.