Macquarie Bank shareholders will in October vote on the creation of a new non-operating holding company structure that will free the bank’s growing portfolio of non-banking operations from the regulatory requirements of the Australian banking system.
The group has also obtained an A$8bn term bank facility from a syndicate of banks that will be used by the new holding company, to be known as Macquarie Group, to acquire assets from Macquarie Bank, which will then become a wholly-owned subsidiary.
It said the changes were needed because its diverse international businesses were growing faster than its Australian banking business. Richard Sheppard, deputy managing director and new head of Macquarie Bank, said the changes should not be seen as a precursor to moving the bank’s listing overseas.
“Non-banking operations have been growing quite rapidly,” Mr Sheppard said, adding the bank was running up against a 35 per cent limit that would restrict its ability to expand such businesses.
The bank added that it had effectively outgrown the conventional banking regulatory model in Australia.
“A significant portion of Macquarie’s businesses, whilst financial services in nature, are not strictly banking,” it said.
Macquarie this year decided to remain an Australian headquartered company “for the foreseeable future” despite a 70 per cent rise in international income to A$3.46bn.
In its latest full-year results, international income outstripped domestic income for the first time.
Allan Moss, Macquarie Bank chief executive, said the new structure would help the bank grow internationally in investment banking, stock broking, specialist funds management, and trading.
Mr Moss will head the new entity, while David Clarke, chairman, will take the same role at both companies. Nicholas Moore will remain in charge of the group’s investment banking activities.
Macquarie said it had received “in-principle” approval from Australian Prudential Regulation Authority to form the new holding company.
Under the proposal, Macquarie Group will be regulated by APRA as a non-operating holding company, while Macquarie Bank would remain a licensed Australian bank.
Macquarie shareholders last month rebuked the group’s board over executive pay when more than 21 per cent of investors voted against its pay structure.
The size of the vote against pay was more than three times larger than an equivalent vote last year and came after Institutional Shareholder Services, an advisory group, urged investors to reject the remuneration report.
The bank said it continued to perform strongly in the opening months of its current year and was hopeful of another record year of profits, which have risen in each of the last 15 years.
Macquarie in May reported full-year net profit of A$1.46bn for fiscal 2007.
Shareholders will exchange their shares in Macquarie Bank for shares in Macquarie Group, which will become the listed entity traded on the local stock exchange. Shareholders will vote on the changes October 25.
Macquarie shares rose A$4.72 to A$69.46 in Sydney.