Tight conditions and broking competition have hit the investment bank's key activities, writes Clancy Yeates.
When politicians talk about the pain of structural change, they often refer to manufacturers or other businesses battling the high dollar.
Treasurer Wayne Swan, for instance, this week said car makers were being placed under "enormous pressure" by the currency, which has squeezed profits and sparked job cuts.
Investment banking rarely, if ever, gets a mention. Famed for its high pay and financial wizardry, it does not attract much public sympathy. Yet it is also grappling with the weakest deal-making market in close to a decade, thanks to deep-seated shifts in the financial world.
And these conditions are creating significant challenges for the country's only investment bank of a global scale: Macquarie Group.
As Macquarie prepares to hand down its full-year profit next month, recent analyst reports have claimed its flagship investment banking arm is under growing stress due to a sector-wide slump in mergers and acquisitions.
Bank of America analyst Frank Podrug said in a recent note that Macquarie was not keeping up with global merger activity. Its announced advisory roles were down 28 per cent in the latest half, compared with a global rise of 31 per cent, he said.
Citi cut its rating on the stock to "sell" last week, citing estimates that Macquarie's involvement in completed deals was down 10 per cent in the six months to March.
"[Macquarie's] M&A deal pipeline in the March quarter has fallen sharply, and while some of this is seasonal, the December quarter was also weak," Citi analysts said.
In the first three months of this year, the value of Australian M&A transactions slumped 40 per cent to just $10.8 billion, the weakest start to a year since 2004, according to Dealogic.
Macquarie is still on top of this dwindling market in advising on mergers and acquisitions. It finished 2012 ahead of rivals Goldman Sachs and Citi after playing a hand in $17 billion worth of deals, a market share of 16 per cent. And its global rivals are all struggling against the same challenges of weak revenue conditions.
However, analyst concerns about a deal drought come as Macquarie's flagship investment banking and securities divisions are grappling with structural challenge.
Investment banks everywhere are being forced to hold more capital, which makes trading much less profitable. At the same time, the rise of online brokers such as CommSec has undercut the margins of traditional stockbrokers.
Chief executive Nicholas Moore acknowledged these challenges in its latest results, saying there was "plainly a degree of structural change" affecting the industry.
In the latest half, its broking arm, Macquarie Securities, made a $46 million loss, while the investment banking division, Macquarie Capital, made a slim contribution of $10 million to profit. The biggest source of profit was the more conservative Macquarie Funds, which added $356 million.
Amid this weakness in the market-facing businesses, in January, UBS analyst Jonathan Mott grabbed headlines by arguing Macquarie should consider selling out of its struggling investment banking and stockbroking.
Those with a more optimistic view on Macquarie's proven ability to reinvent itself, however, dismiss calls like this.
A Nomura analyst, Victor German, says deal-making and stockbroking are "at the heart of what Macquarie does".
"I don't think Macquarie has been doing materially worse than its peers or better, their recent performance reflects challenges that investment banks are facing given market conditions," German says.
Argo Investments, a shareholder in Macquarie since it was an unlisted company called Hill Samuel Australia in the 1980s, also believes the business can recover.
Its chief executive, Jason Beddow, says Macquarie might need to focus more on the Australian and Asian markets, rather than maintaining an expensive network of offices in the US and Europe.
He also concedes the bank is not as leveraged to any bounce back in the cycle as it was in the giddy days of 2007 - when its share price surged towards $100 as it "clipped the ticket" on a series of complex infrastructure deals.
Ultimately, though, he is confident investment banking will eventually recover because companies will always look to acquire each other, giving advisers the chance to pocket lucrative fees.
"Unless you think financial markets are broken forever, the way deals are done, they are still done through investment banks.
It will still make reasonably chunky fees," he says.