Was there something in the mini hot pies served after Macquarie’s annual general meeting in Melbourne on Wednesday? In spite of a rather cheerless AGM – the Australian bank said it was becoming “increasingly challenging” to match last year’s $1.8bn of net profits – the share price leapt almost 12 per cent. Macquarie may have rejigged the model, but it remains at heart a banking group, dependent on credit markets to fund its growth and investors to buy its products. As such, its share price has been ravaged along with those of its global peers over the past 12 months. After three years of de-rating, it trades on almost nine times consensus earnings forecasts for this year, a discount to the global sector. That looks churlish when you consider that Macquarie is still making money, unlike many banks, and has scant exposure to the toxic products that pushed US and European rivals into the red. This year analysts are forecasting net profit of A$1.7bn, a mere 5 per cent below last year’s record number.

But crimped expectations of future growth hint at cracks in the model rooted in buying assets and packaging them into funds that are then spun off, creating multiple fee-skimming opportunities along the way. Funding costs have risen as credit markets have retreated. Macquarie has a decent capital buffer but funding growth will inevitably get harder. The bank has already taken writedowns on its real estate investments; more could follow given the sector’s deterioration. Performance fees are withering, with just one of the group’s 20 listed funds contributing in the second half of the last fiscal year. And a group that relies on mergers and acquisitions fees for 17 per cent of its operating income is clearly going to feel the pinch as global deal volumes recede. Brokerage and commissions likewise look vulnerable with global stock market turnover down sharply in the second quarter of 2008. Macquarie’s bounce on Wednesday looks rather optimistic.