July 30, 2010 –   * Trading, investment banking, securities hit

* Surplus capital of A$3.1 billion also weighing

* Shares fall more than 6 pct to one month low

* Mirrors Goldman, Citigroup, Bank of America-Merrill Lynch (Adds details)

By Narayanan Somasundaram

SYDNEY, July 30 (Reuters) - Macquarie, Australia's top investment bank, joined global peers in warning weak markets were hurting key businesses, pulling back from a bullish forecast in April and sending its shares down more than 6 percent.

Macquarie, which is cutting its reliance on Australia by pushing into North America and Europe, said its investment banking, trading, securities and advisory businesses which make up more than half its annual revenue, were unlikely to meet financial year 2010 results.

In a trading update ahead of the group's annual general meeting, it said earnings in the quarter to June 2010 were slightly ahead of a year ago but were being pinched by falling global markets and the debt crisis in Europe.

"Macquarie is more of a traditional investment bank now. If markets are subdued, they will more than stumble," said Simon Burge, chief investment officer at Above The Index Asset Management. "In effect, unlike earlier when they could control the pace, now the market does."

Macquarie pioneered a model of buying and pooling assets, listing them on an exchange and charging fees for managing them but over the last few years has migrated to a more conventional investment banking model.

Macquarie is also sitting on large swathes of capital and liquid assets that are earning low yields and hurting earnings, analysts said.

"Simply put most banks in the world are finding it difficult to refinance their existing assets," said CLSA analyst Brian Johnson. "Conversely Macquarie is in the opposite position with the challenge being to deploy the excess funding."

Macquarie said it had A$3.1 billion in surplus capital, lower than the A$4 billion at the end of the last financial year, and A$29 billion in liquid assets.

INVESTMENT BANKING MALAISE

Macquarie's announcement follows weak earnings from Goldman Sachs and poor investment banking numbers from Citigroup and Bank of America Merrill Lynch.

Macquarie stopped short of giving an indication of where it expected its first half or 2011 earnings to be. A Reuters poll of eight analysts on average forecast Macquarie's first-half profit would rise 38 percent to A$660 million.

Its shares fell as much as 6.7 percent and by 0014 GMT were down 5.3 percent to trade at A$36.30, a one month low.

"Lowering in confidence levels across all markets has meant that the global investment banking fee pool, was the lowest June quarter global investment banking fee pool since 2004," Chief Executive Nicholas Moore said.

Macquarie, which earns nearly half its income in Australia, has suffered from slower Australian mergers and acquisitions advisory activity and equity underwriting.

M&A activity targeting the Australasian region fell by 28 percent to $65.3 billion and equity issuances fell by 80 percent year to date, according to Thomson Reuters data.

Macquarie, dubbed the "millionaires' factory" for its senior bankers' hefty pay packages, has also been hit by several high-profile banker exits.

Recently Andrew Low, Macquarie's chief operating officer and the head of its global financial services advisory, quit.

Jim Rossman, U.S. equity capital markets chief, and David Baron, head of U.S. financial sponsors coverage, are among other top bankers who have left the firm.

Macquarie is diversifying from the Asia Pacific by acquiring businesses in North America and Europe. Last year it made five North American acquisitions and has hired traders and bankers in the market to more than triple revenue from that region.

But the group was silent on acquisitions in the works.

Macquarie was in a consortium bidding for British power grids being sold by France's EDF for 5.5 billion pounds. However, a rival group including Cheung Kong Infrastructure won the deal, sources said.

The 30 percent fall in Macquarie's share price since its peak in April put it at 9.3 times forward earnings, just ahead of Morgan Stanley and Goldman Sachs which are trading at around 8.5 times, according to StarMine Smart Estimates. (Additional reporting by Michael Smith; Editing by Ed Davies and Lincoln Feast)