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NY Times: Business Slows on Wall Street

Monday, 20 Sep 2010 09:02 AM

Despite taxpayer bailouts, Wall Street investment banks are experiencing a slowdown.

“What’s happened in the third quarter is that after a very slow summer, people expected things to come back,” bank analyst Meredith Whitney told The New York Times. “But they haven’t, and the inactivity is really squeezing everyone.”

It’s a trend Whitney says could lead to bank layoffs of as many as one in every 10 workers.

Whitney notes that stock and bond sales and advising on mergers, which define what investment banks do, are at levels well below where they were at this point last year, foreshadowing lean years ahead in the broader financial services industry.

According to research firm Capital IQ, the number of stock offerings is down 15 percent from this time last year and bond issuance is down 25 percent worldwide.

Using these figures, Whitney predicts that annual revenue from Wall Street’s main businesses will drop 25 percent, to around $42 billion in 2010, from $56 billion last year.

Large commercial banks are still making a lot of money, but brokerages and investment banks aren’t, leading Citigroup analyst Keith Horowitz to reduce his earnings estimates for Goldman Sachs by 35 percent and to revise earnings for Morgan Stanley from $726 million to $140 million.

Even though the final third quarter numbers aren’t in yet, the pace of trading this summer was clearly slower than usual, with shares listed on the New York Stock Exchange down by 11 percent in July from 2009 levels, and August volume off by almost 30 percent.

In addition, investment banks are scaling back on proprietary trading, which will soon be forbidden under terms of the financial reform legislation passed by Congress this summer.

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Despite taxpayer bailouts, Wall Street investment banks are experiencing a slowdown. What s happened in the third quarter is that after a very slow summer, people expected things to come back, bank analyst Meredith Whitney told The New York Times. But they haven t, and...
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2010-02-20
Monday, 20 Sep 2010 09:02 AM
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