Macquarie sports a kevlar vest

If optimism is a relative concept then Macquarie Group's Nicholas Moore is relatively, if very cautiously, optimistic.

His comments to today's Macquarie annual meeting depicted a group still in an understandably defensive mode but in modestly better shape than it was in during its last financial year, when the brittle and volatile market conditions swamped its market-facing businesses and wiped more than $500 million off their contribution to the group‘s results.

Today Moore said the group's performance for the first quarter was ahead of the subdued first quarter of the 2012 financial year and he continued to expect improved results for the 2013 financial year – provided market conditions didn't deteriorate.

That proviso is a very real one. With the eurozone's troubles unresolved and, if anything, worsening, and global capital markets still volatile and characterised by low levels of activity, no one can be confident or comfortable that conditions for investment banking businesses won't worsen again.

But, having bitten the bullet last year and having cut 1354 people and $419 million from Macquarie's cost base, Moore enters this financial year with a leaner group that is at present performing pretty much in line with its earlier guidance for an improved result.

In 2012 Macquarie significantly re-based its costs after reluctantly concluding that there had been a semi-permanent, perhaps even permanent, change to the settings in which investment banks would operate within in future.

There has also been an exodus of long-serving and senior Macquarie executives as part of both the cost-cutting program and what appears to have been a general recognition of the need for generational change in the group's leadership.

Today Moore said operating expenses were about 10 per cent lower than a year ago. Macquarie actually took about 13 per cent, or $736 million, out of its cost base last year but that was offset by some new investment in the business and restructuring costs.

There were no surprises in his evaluation of the current performance of Macquarie's portfolio of businesses.

Macquarie Funds, he said, is on track to produce a broadly similar result to 2012, as is the corporate and asset finance division and banking, and financial services was expected to produce an improved result.

The markets-facing businesses – Macquarie Securities, Macquarie Capital and the fixed income, currencies and commodities division – were also expected to show improvement, market conditions willing, although Macquarie Securities, which lost $194 million last year, was still unlikely to be profitable unless conditions improved.

At present, like most of its global peers, Macquarie is battening down the hatches, focusing on costs, shoring up its balance sheet and waiting for markets to show some stability. That conservatism, and the low-returning hoard of liquidity Macquarie has accumulated, carries a financial penalty but provides insurance against another financial system shock.

Unlike some of its peers, Macquarie hasn't been caught up in scandals or experienced big speculative trading losses and its big expansion of its annuity-style business during the early phase of the financial crisis has at least provided a core of stability within its earnings base.

If and when conditions improve – particularly for its securities business – it is well positioned, even if it seems unlikely that investment banks will ever be able to return to their halcyon pre-crisis condition, given the changes in the environment and the regulatory settings. If they don't – if there is another global financial system implosion – Macquarie has demonstrated it can survive and is better prepared to cope with another shockwave than it was in 2008, when its business model was leveraged to growth.