The bleeding on Wall Street continues. According to the Securities Industry Association’s recent report, the securities industry’s profits continue to dive.
Pre-tax profits in the second quarter dove 33 percent to $2 billion from $3 billion in the second quarter compared to the first quarter. Indeed, the second quarter was the third worst quarter in six years.
Given the data, the SIA expects full year profits of just $10 billion, 4 percent lower than last years’ $10.4 billion. In comparison, the industry reported a record $21 billion in 2000.
"The current state of the industry promises no real rebound in industry profitability until at best 2003," says George Monahan, vice president and director of industry studies at the SIA. Monahan warns that should a double-dip recession occur that rebound could be pushed back even further to late 2003 or 2004.
Firms will also need to continue to aggressively cut costs, meaning further layoffs and compensation cutting. Already, between April 2001 and March 2002 the securities industry cut 67,700 jobs, a 9 percent reduction in overall headcount. This was "just a precursor" of what’s to come, according to Monahan. With no rebound in the immediate future firms that held on to talented employees will be forced to make more cuts. Firms that have already made cuts, says Monahan, will have to "cut deeper still." Other firms are reducing costs by reducing severance packages.