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Jeffrey Hutton is a Morningstar contributor.

Macquarie Group's (MQG) full-year profit will fall to its lowest level in almost a decade because volatile markets and European debt woes put a brake on initial public offers (IPOs) and sales of equities.

Shares in the Sydney-based company slumped 5 per cent after the company on Tuesday said net profit for the year ending 31 March will shrink by a quarter to $717 million, down from the $956 million a year earlier.

Seemingly unending talks in Europe to restructure debt, natural disasters, political gridlock in the US and the threat last year of global recession has sapped investor confidence. There are now simply too many investment banks chasing fees from deal-making and trading, the company said.

"Everyone in this room sat here this time last year and thought the market was in a poor state and would probably, on balance, get better in the following year," Nicholas Moore, Macquarie's chief executive officer, told analysts at a briefing in Sydney.

"That didn't eventuate. There are lots of reasons why. The big thing was the macroeconomic uncertainty out of Europe is prompting some people to stay on the sidelines."

Samsung Securities said last month it would withdraw from operations outside of South Korea. Also last month, Royal Bank of Scotland said it was selling or closing its equities, mergers and acquisitions (M&A), and equity markets business.

But Moore stressed that the company's broad geographic and business segment reach will position the company to tap any meaningful market trend.

"Looking at Asia, it's not suffering from deleveraging. If anything, Asia is underleveraged," Moore says.

"It's tough to make macro calls where our markets are going to go relative to Europe and the US. Europe has had a big impact over the last 12 months and certainly over the last quarter."

But two of the company's businesses, Macquarie Securities and Macquarie Capital, which tap into equity and money markets, are bearing the brunt of investor caution.

Macquarie Securities' second-half operating income will more than halve compared with the year earlier period. Macquarie Capital's second-half operating income will fall 35 per cent.

The results surprised many analysts. Peter Rae, senior equities analyst for Morningstar, had forecast net earnings of $889 million.

Deustche Bank analyst James Freeman had forecast as recently as last week net income of $834 million.