Tokyo/Sydney: Japan’s Nomura Holdings Inc and Australia’s Macquarie painted a bleak first quarter picture of meager deals and frail markets.

It wasn’t dire enough, however, to halt their global expansion or blunt Nomura’s aspirations to join Goldman Sachs and other US and European rivals among the investment banking elite.

“We want to make it into the top group as soon as we can," Nomura’s chief financial officer Masafumi Nakada told reporters in Tokyo after revealing the investment bank’s lowest profit in six quarters — since it lost over $2 billion, burdened by costs of acquiring the European and Asian assets of failed US investment bank Lehman Brothers in 2008.

Macquarie earlier warned its investment banking, trading, securities and advisory businesses were unlikely to match the previous year’s level, sending its shares down 3%.

The banks’ downbeat updates mirror grim results from peers such as Goldman, Citigroup and Bank of America Merrill Lynch as shaky financial markets cut into fees from trading, underwriting and advising on deals.

“The market was out of control so business was inevitably affected," said Azuma Ohno, a brokerage analyst at Credit Suisse Securities in Tokyo.

“Overall, it wasn’t a bad result."

Nomura said hedge funds and other institutional investors pulled back from markets after volatility spiked in the wake of the European debt crisis.

Nomura’s profits from trading halved and its overall net profit slumped 80% in April-June from a year ago to just ¥2.3 billion ($27 million).

Its trading and investment banking business had a pretax loss of ¥41.1 billion on sales of ¥108.6 billion, down 49%. Retail business revenue rose 35% to ¥37.7 billion on sales of ¥111 billion, up 16%.

In a trading update ahead of its AGM, Macquarie said April-June earnings were slightly ahead of a year ago, but were pinched by falling global markets and Europe’s debt crisis.

It warned it might not be able to make good on a forecast made in April of improved annual results across its businesses.

“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, which earns nearly half its income in Australia, has suffered from a slowdown in deals. M&A activity targeting the Australasian region has dropped 28% to $65.3 billion and equity issuances are down 80% in the year to date.

Macquarie stopped short of giving an indication of where it expects first-half or 2011 earnings to be. A Reuters poll of eight analysts on average forecast Macquarie’s first-half profit would rise 38% to a $660 million ($594 million).

Nomura’s performance was also slowed by a sharp drop-off in its underwriting business. Japanese companies sold $5.2 billion worth of shares in the quarter, less than half the $13.8 billion raised a year ago, Thomson Reuters data showed.

“Because the market environment deteriorated, some deals planned in this quarter got delayed," said Nakada, though Nomura kept its lead position in Japan’s equity capital markets for the quarter, controlling 42.4% of underwriting.

Breaking out

Both Nomura and Macquarie are looking with some urgency to break out of Asia and become leading global brokerages.

Macquarie is cutting its reliance on its home market by pushing into North America and Europe. Nomura is using its Lehman buy as a springboard into Europe, while offering big pay packets in the US to attract top flight investment bankers.

Nakada said Nomura had no plans for now for more overseas acquisitions, but noted a Tier-1 ratio of 16.9% gave it a solid financial footing as it looks for ways to expand.

Macquarie, which pioneered a model of buying and pooling assets, listing them on an exchange and charging fees for managing, has in recent years migrated to a more conventional investment banking model.

Dubbed the “millionaire’s factory" for its senior bankers’ hefty pay packages, Macquarie is 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’s shares tumbled as much as 6.7% in three times the normal daily volume, and closed at their lowest in more than three weeks.

Ahead of the results, Nomura shares ended down 1.6% at ¥481, in line with the securities sector subindex. Nomura’s stock has fallen 29% this year, while the sector index is down 25%.