Macquarie Group is pushing deeper into wealth management, as the company continues its reinvention from a hard-nosed investment bank to a business that is less hostage to swings in market sentiment.
Chief executive Nicholas Moore on Thursday upgraded profit guidance for Macquarie's star division - the funds management arm that has been a growing focus for the company.
Profits from the division are now expected to rise this year, after assets under management swelled by almost 10 per cent to $379.3 billion, and the business raked in $65 million in performance fees.
While conditions were more subdued in other parts of the Macquarie empire, Mr Moore also maintained previous guidance and said total earnings would rise this year.
As some investors had been expecting a stronger upgrade in earnings, its shares dropped 2.3 per cent to $44.65 after the comments at its annual general meeting in Melbourne.
In a sign of the high expectations being heaped on the bank, some analysts now expect a recovery in global financial market activity to lift profits by 30 per cent, after hitting $851 million in the year to March.
The fresh guidance comes as the group seeks to extract a larger slice of its earnings from global funds management - a less volatile line of business than investment banking. It this month snapped up ING's Korean 2.5 trillion won funds asset management business.
The senior investment officer at Macquarie shareholder Argo Investments, Christopher Hall, said Macquarie's funds management arm had become a "very meaningful" part of its growth prospects.
"Macquarie's group earnings are continuing to be driven more by the annuity-style business and less from the market-facing, cyclical businesses," he said.
Mr Hall said the $65 million in performance fees from Macquarie's funds management arm was "pretty meaningful" and highlighted the value of its annuity-style business.
"If they can continue to outperform, performance fees will naturally continue to grow," he said.
Mr Moore remained cautious on the outlook for markets, but said he also expected stronger performances from the banks flagship investment banking and stockbroking arms in the year ahead.
Both of these businesses have suffered from a paucity of merger and acquisition activity and market turnover - resulting in deep cost cutting. "In the short term we expect those businesses, Macquarie Capital and Securities, to be stepping up," Mr Moore said.
"In the medium term we're very very confident in terms of those businesses making a material contribution to the group as well."
The bank has also benefited from the slump in the Australian dollar because it earns about 60 per cent of its profits in foreign markets. A 10 per cent fall in the currency boosted earnings by about 6 per cent, Mr Moore said.
Whether the bank can hit the growth forecasts being hatched by analysts will probably depend on whether the signs of increased confidence on global financial markets translate into an increase in equity market activity.
The market for new company listings has recently been tested with the floats of Virtus Health and iSelect. Insurance broker Steadfast also plans to raise $334 million from investors before its listing next month.
But CommSec analyst Ross Curran said businesses dependent on equity markets would face tough conditions over the short term.
"We expect those investment market-facing businesses like Macquarie or Computershare are likely to have a pretty tough six-to-12 months. Corporate activity is undergoing a slower recovery than we thought," he said.
Separately, the investment bank revealed former Productivity Commission chairman Gary Banks was joining its board as an independent non-executive director.