JPMorgan Chase & Co. CEO Jamie Dimon and Goldman Sachs CEO Lloyd C. Blankfein predict Wall Street will rebound from 2011’s trading- revenue plunge. Rivals and analysts aren’t so sure.
Fourth-quarter earnings reported by the six largest U.S. banks show the industry suffered a third straight quarterly drop in combined trading and investment-banking revenue. On conference calls this week, analysts are pressing executives with a similar refrain: Is it a temporary rut or a lasting shift to smaller volumes, profits and pay?
Executives and analysts are focusing on whether stiffer regulations, capital rules and a weak economy may solidify a decline in revenue after the European debt crisis curbed trading volume and corporate dealmaking in last year’s second half. Credit Suisse Group AG, UBS AG and Royal Bank of Scotland Group Plc, which are all shrinking their investment banks, have announced plans to eliminate about 8,300 jobs since the start of November.
“We’d all hoped that the headwinds to our business, including low levels of client activity, low interest rates, market volatility and political uncertainty around the world would subside,” Credit Suisse CEO Brady Dougan told analysts Nov. 1. The bank said that day it would cut about 1,500 jobs, in addition to 2,000 previously announced, and reorganize its securities unit after reporting third-quarter profit that missed analysts’ estimates. “It’s now clear, however, that these secular trends may persist for an extended period,” he said.
Dimon and Blankfein have since sought to reassure investors that markets and earnings from securities units will rebound.
Find out more at http://www.businessweek.com/news/2012-01-20/dimon-blankfein-predict-market-rebound-as-rivals-pull-back.html
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