Macquarie Group admitted yesterday that volatile credit markets might break its 16-year run of rising profits next year, even as it said that the squeeze may be easing.

The comments came as it emerged that Australia's leading investment bank had hired nearly 330 staff in London during the past year, taking its head count in the City to 1,080.

Macquarie, a keen investor in British infrastructure, whose funds acquired the communications networks National Grid Wireless and Airwave O2 last year, reported a 23 per cent rise in net profits of A$1.8 billion (£880 million) for the year to March 31.

Shares in the bank fell 7.3 per cent, however, after it reported that second-half profits had risen only 1.4 per cent to A$743 million.

Macquarie, which has no material exposure to toxic credit, said that its funding costs had risen amid the decline in debt markets that had hampered mergers and acquisitions.

It also took a A$293 million charge as the value of its listed property investments fell.

“It will be challenging to repeat last year's record performance, but this may be achievable,” Nicholas Moore, the incoming chief executive, said.

Yet Mr Moore, 49, who takes over from Allan Moss after 15 years next week, also said that debt markets were improving, which should result in more transactions taking place, and that Macquarie's strong capital position meant that it could make acquisitions.

“The main challenge in the market is the debt market, and particularly the term debt market. There's a thawing taking place but it is nothing like normal,” he said.

Analysts said that investors were disappointed that Macquarie had met, rather than exceeded, its profit guidance.

“The issue that will be slightly surprising is for all the guys that were aggressively shorting [Macquarie] and looking for signs of major fissures appearing in the business model or the risk profile of the balance sheet - and that looked pretty good,” Peter Rice, an analyst for BBY, the Australian broker, said.

The 44 per cent rise in staff numbers in London contributed to a 31 per cent boost in the global headcount to 13,000 and Mr Moore said that further expansion was planned.

For example, he said, about 30 staff had been employed in fledgeling securities businesses in both London and New York and these numbers would soon double in each city.

“This year we hit an interesting milestone in that we [Macquarie Capital] recruited more graduates in London than we did in Sydney, which is reflective of the growth across the business,” Mr Moore said.

Macquarie's results are in contrast with those of Wall Street's investment banks, many of which have written off billions of dollars in investments related to sub-prime mortgages in the United States and are shedding thousands of staff.

The results were published on the same day that Mitsubishi UFJ Financial, Japan's biggest banking group, reported a 27.7 per cent slump in annual net profits, a fall blamed on increased writedowns for its struggling credit card business and losses related to sub-prime loan exposure.

The group's net profits were 636.6 billion yen (£3.1 billion), against Y881 billion the year before.

Mitsubishi UFJ said that it had booked a loss of Y81 billion for its exposure to sub-prime loans and structured investment vehicles. It also incurred a loss of Y42 billion on investments in other securitised assets.

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