Sinking feeling ... Macquarie chief Nicholas Moore. Photo: Reuters
From rooster to feather duster in just four years. That's the unfortunate position in which Macquarie chief Nicholas Moore finds himself.
Ever since he inherited the chalice in 2008, as the world was descending into a financial maelstrom, Moore has been forced to adopt the rather uncharacteristic strategy of cover and defend.
Considered the architect of Macquarie's astonishing growth during the boom years, his ascension to the top job during a time of crisis forced him to confront the shortcomings of that deeply flawed strategy as the ''Macquarie model'' unravelled rapidly and the organisation went cap in hand to Canberra for assistance.
Illustration: John Shakespeare
While he managed to pull the organisation through the darkest days of the crisis without incurring major losses and, even more astonishingly, ripped out massive fees to cut loose its former satellites such as Macquarie Airports, one question always hovered over the group. What of the future?
In an odd strategic shift, Moore tried to answer that by expanding heavily into America and Europe even as it was apparent that Asia had helped to stave off global recession and was shaping to be the growth engine of the world economy.
That decision now must be seen as a monumental error.
For months now, there has been talk of mass sackings at Macquarie, with up to 1000 employees said to be for the chop, speculation the group has steadfastly refused to address - and rightly so from a strategic viewpoint.
In the alpha world of investment banking, it would be a seriously inept chief executive who would admit defeat even as the tanks were roaring up to surround the bunker.
Yesterday two factors combined to seriously tarnish the Silver Doughnut's reputation and its outlook.
In the morning, reports flew across wire agencies that Macquarie had shut its Miami office, fired its chief emerging markets specialist and abandoned its Latin American fixed-income business.
Those reports were met by an eerie silence, first from Macquarie's New York office and later from Sydney, although investors responded by marking down the bank another 3.7 per cent to $21.24.
Then late yesterday, the chaos descending over European financial markets deepened when ratings agency Moody's downgraded two of France's biggest banks, Societe Generale and Credit Agricole, by one notch because of their exposure to Greek sovereign debt.
While expected for months, confirmation of the downgrades is expected to further weigh on already battered investor confidence in Europe, which has been driving bourses lower across the region and across the Atlantic.
Just last week, Moore was forced to admit to yet another Macquarie profit downgrade, confirming the transformation from what once was unthinkable into a trend.
Earnings for the September half are expected to be well below last year's $403 million, which in itself was 16 per cent down on the previous corresponding period.
While Moore is desperately clinging to hope that the second half will provide a better environment to push full-year earnings back onto a growth path, the situation is not looking good.
With markets heading lower, the immediate future for investment bankers globally is bleak. Consumers aren't spending, banks aren't lending, corporations are deleveraging and the frenetic takeovers activity and mergers mania of the early part of this century has become a mere memory.
To cap off the problems for traders such as Macquarie, investors have flocked to the imagined safety of US bonds and abandoned high-yielding fixed-interest investments such as those in Latin America. Hence yesterday's Miami closure.
In London, there has been talk of mass lay-offs in investment banks with estimates that up to 80,000 jobs will go across Europe as the economy weakens and markets deteriorate.
The situation on Wall Street is hardly encouraging either, as the US economy continues to red-line and threatens to dip into recession.
While it could be argued that Moore at least is not travelling alone, the impetuous nature of his expansion during a period of unprecedented instability on global markets now is looking misguided.
In the ultimate irony, the Australian market was one of the best performers during what now has become the Awful August of 2011. Our market shed 2.9 per cent during the month, about half of that of other major markets.
Not that there has been a great deal of investment banking joy in Australia of late. The last great rush of blood to the head came during late 2009, when the corporate world took advantage of a brief period of sunlight, raising more than $100 billion in new equity from investors to pay down debt.
Those equity raisings provided handsome fees to a handful of investment banks. Unfortunately, it also attracted the attention of Wall Street and European firms which piled into Australia, poaching staff and pushing up salaries, all in the hope that Australia would be a springboard into Asia.
That hasn't happened. There have been precious few mergers or acquisitions since as equity markets have tanked and corporations have eschewed debt, leaving many in the finance industry on shaky ground. Even UBS, Macquarie's great nemesis and the operation that cleaned up in 2009, is said to be ''losing'' staff.
Macquarie's one saving grace appears to be a hoped-for windfall dividend from its remaining 22 per cent stake in Macquarie Airports, the entity it was forced to abandon when it unwound the ill-fated Macquarie Model.
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