UBS raised concerns over whether Macquarie's capital levels were adequate for the current bear market

MACQUARIE Group shares pushed near decade-long lows, capping off a downbeat week for the investment bank during which it took the rare step of dousing rumours that it was preparing to undertake a capital raising.However, the pressure remained after brokerage UBS raised concerns over whether Macquarie's capital levels were adequate for the current bear market. The report is likely to reset old tensions between Macquarie and UBS banking analyst Jonathan Mott.A downbeat report released by Mr Mott in August last year helped trigger a 10 per cent share dive for Macquarie in a single day. At the time, Mr Mott slashed his share price target for Macquarie, saying the bear market would continue to place pressure on it and its satellite funds.Mr Mott issued a further negative report when Macquarie reported its interim results in November.The latest report by Mr Mott said ongoing market volatility put continued pressure on its asset values and capital.While Macquarie this week said it had some $2.9 billion of capital in excess of regulatory minimum, Mr Mott said regulatory minimum was "not the appropriate benchmark" given the current environment.
With the value of Macquarie's holdings of listed and unlisted investments coming under pressure, any large write-downs in asset values would soon start pressuring the capital held in the non-banking arm, he said.

But it was not all bad news for Macquarie: a second brokerage, Citigroup, yesterday upgraded its rating on Macquarie to "buy". Citigroup analyst Mike Younger said Macquarie would be able to accommodate as much as $2.5 billion in write-downs across its funds and other assets without impacting Tier 1 capital levels. Macquarie is expected to take at least $2 billion worth of write-downs this year.

"(Macquarie Group) has very strong funding and liquidity locked in, adequate capital for now and underlying earnings that continue to track ahead of awful market trends," Mr Younger said.Macquarie yesterday said its capital ratios "continue well in excess" of the regulatory minimum required by the Australian Prudential Regulation Authority.While Macquarie said it had "no current plans for a capital raising", the investment bank is believed to have first heard talk of the potential raising through its own stockbroking arm.Several dealers at rival brokerages contacted by BusinessDay yesterday queried the depth of the rumours. One said talk of a share placement was no stronger than day-to-day market chatter.Focus on Macquarie comes at a critical time for the investment bank, with the Federal Government weighing up whether to lift the ban on the short-selling of financial stocks. Its shares ended down 2.9 per cent at $16.98. In total Macquarie's shares were down 17 per cent for the week.