It’s the Millionaires Factory no more. Dozens of Macquarie banker CVs have hit the in-trays of hedge funds, rival merchant banks and other finance outfits about town in recent months.

The big deals don’t flow like they used to, neither do the bonuses. So the aspiring millionaires are taking flight from the nation’s once pre-eminent fee factory.

It’s a chicken-and-egg scenario. Macquarie’s scintillating success always came down to its smart people hatching smart ideas, and smartly executing them. But the smart people were lured by the spectre of ample financial rewards in the first place. As those rewards dissipate, so does the capacity to lure the best, and keep them.

Nowhere is the plight of Macquarie more vividly exposed than in charting its return on equity (ROE). On the face of things, the billion-dollar profits continue to roll: a $1 billion bottom line last year, a projected $960 million this year. Yet the real value to shareholders resides in the ROE, or the return generated for every unit of shareholders’ equity. This is the pure measure of efficiency.

From 1998 to 2001 ROE consistently surpassed 25 per cent. It dipped during the downturn in 2001, then in the salad days of the ”Macquarie Model” ROE again averaged 25 per cent. It had run up from 19.5 per cent in 2002, as the bank spawned its constellation of satellite stocks, to peak at 29 per cent in 2005. The year that the stock price topped out at $97, in mid-2007 just before the credit market meltdown, the decline began.

The year of the financial crisis, 2009, ROE plummeted from 23 per cent to 10 per cent and never recovered, despite headline profits, incredibly, hovering at the billion-dollar mark. It should be said – especially in light of the demise of its fly-by-night imitators Allco and Babcock & Brown – that it is a commendable feat that Macquarie is still about today, and still generating impressive profits. For shareholders, though, profitability, not headline profits, is the key. And the key question for the market is, will it ever return?

As evinced by the present market valuation, a PE ratio of 10, the market no longer thinks so. That stock price premium for consistently delivering happy surprises has vanished, along with the satellite spin-off model. Efforts to replace the spin-off model haven’t worked.

Typically bold and countercyclical, the rainmaker-turned-chief executive Nick Moore went on a spending spree just as the worst of the financial crisis was past, mopping up a swathe of brokers and fund managers around the world in the hope the markets would bounce and deliver a renewed surge in trading and fee revenue.

Two problems here: one, most of the assets were acquired in the US where deal-flow failed to recover to pre-crisis levels, and the US now faces the spectre of a double-dip recession. Two, in Asia where the market action was really hotting up, expenses have risen while income is under pressure. So Macquarie has struggled to capitalise on booming Asian markets.

Responding to an analyst’s question at the last presentation in May, as to staff retention and the group’s prospects in Asia, Moore noted that Asia, ”particularly in equities, is

a very hot market” but ”we are seeing high levels of turnover and existing players who reduce their workforce actually stepping back and rehiring”.

This staff ”churn” is hitting the group’s expense line. The cost-to-income ratio had spiralled to 83 per cent last year, way above the long-term average.

In its halcyon days, the bank was renowned for its conservative accounting, which is a polite way of saying it smoothed profits, or ”hollow-logged”.

These days, the hollow logs are full of expenses, not profits. Until now, by deferring a large chunk of bankers’ bonuses – in many cases about 70 per cent – it had managed to keep the expenses away from the profit and loss account.

Macquarie is running out of tricks. No more $100 million exit fees for selling management rights over satellites, no more revaluing satellites at balance date, no more raiding the cash management trust to prop up the balance sheet (which lifted deposits by $12 billion last year).

And no more government guarantee to feed on, then lend out the borrowings at a higher rate. Macquarie went gangbusters on this once-in-a-lifetime lurk, borrowing $17 billion on the sovereign teat. The three- to five-year money will have to be rolled over from next year.

Dropping deal-flow and the ravages of the financial crisis has beset every bank in the world yet, for Macquarie, the upshot is more critical since its performance has always been more keenly linked to remuneration and the bonus pool structure is surely under pressure.

This is no one-trick pony. Macquarie’s satellite model, which shot it to financial stardom, was not its first brilliant strategic incarnation. But the recent fall in the stock price signals a belated market recognition that, without a return to far more buoyant economic and trading conditions worldwide – and given the challenge of leveraging something of this size into a money-spinner again – the group is in for a long, painful haul.

The present strategy is not bringing home the bacon. In light of the competition for talent among its rivals, and the fact that the market is awake to the wiles of financial engineering these days – and we have only just witnessed another internal divisional restructuring to muddy the accounting waters – the risk, as they say, remains ”on the downside”.

But frankly, given the global financial crisis and Macquarie’s humungous leverage, it should be applauded for simply being alive.