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Samuel Dobson: 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.
Shemara Wikramanayake: 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.
Alex Harvey: 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.
Shemara Wikramanayake: 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.
Samuel Dobson: 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.
Matthew Dunger: 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?
Shemara Wikramanayake: 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.
Benjamin Way: 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.
Matthew Dunger: 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?
Alex Harvey: 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.
Shemara Wikramanayake: 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.
Samuel Dobson: I'll go to Jon first, and then Andrew, or maybe...
Jonathan Mott: 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?
Shemara Wikramanayake: 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.
Alex Harvey: 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.
Jonathan Mott: 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?
Benjamin Way: 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.
Samuel Dobson: Great. So we're going to Andrew just at the front again.
Andrew Triggs: 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?
Shemara Wikramanayake: 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.
Benjamin Way: 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.
Andrew Triggs: 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?
Shemara Wikramanayake: 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?
Simon Wright: 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.
Shemara Wikramanayake: 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.
Simon Wright: 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.
Samuel Dobson: We'll go to Andrei in the middle there, please.
Andrei Stadnik: 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?
Shemara Wikramanayake: 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.
Benjamin Way: 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.
Andrei Stadnik: 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?
Shemara Wikramanayake: 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.
Michael Silverton: 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.
Alex Harvey: I might have...
Shemara Wikramanayake: 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.
Alex Harvey: 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.
Samuel Dobson: Great. Ed, just in the second row there, please.
Ed Henning: 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?
Shemara Wikramanayake: 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.
Simon Wright: 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?
Andrew Cassidy: 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.
Shemara Wikramanayake: 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.
Ed Henning: 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.
Shemara Wikramanayake: 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?
Simon Wright: 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.
Shemara Wikramanayake: 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.
Ed Henning: 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.
Alex Harvey: 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.
Shemara Wikramanayake: 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.
Alex Harvey: 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.
Shemara Wikramanayake: 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...
Alex Harvey: Shipping a barrel of oil won't be the same necessarily writing mortgage, but it's got some characteristics.
Samuel Dobson: 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.
Operator: Your first question comes from Matthew Wilson with Jarden.
Matthew Wilson: Matt Wilson, Jarden. Firstly, Alex, all the very best. You'll be missed as a CFO. It's been a pleasure dealing with you.
Alex Harvey: Thanks, Matt.
Matthew Wilson: 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?
Shemara Wikramanayake: Can we turn to Ben...
Benjamin Way: 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.
Shemara Wikramanayake: Okay. Thank you, Benjamin.
Samuel Dobson: Go ahead, Matt.
Matthew Wilson: Hello?
Samuel Dobson: Yes, we can hear you, Matt.
Matthew Wilson: 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.
Shemara Wikramanayake: 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?
Benjamin Way: 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.
Operator: Your next question comes from Brendan Sproules with Goldman Sachs.
Brendan Sproules: 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?
Shemara Wikramanayake: Yes, we will let Michael, go straight to that.
Michael Silverton: 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.
Brendan Sproules: 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?
Michael Silverton: 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.
Operator: Your next question comes from Tom Strong with Citi.
Thomas Strong: 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?
Shemara Wikramanayake: 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?
Simon Wright: 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.
Alex Harvey: 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.
Operator: Your next question comes from Brian Johnson with MST.
Brian Johnson: 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?
Michael Silverton: 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.
Operator: There are no further questions at this time. I'll now hand back to Mr. Dobson for closing remarks.
Samuel Dobson: 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.