TEXT-Fitch: US securities firms' outlook negative amid economic uncertainties
Nov 9 - Economic uncertainties combined with a host of new regulations will continue to constrain both revenues and earnings for U.S. securities firms, according to a Fitch Ratings report published today. Fitch has a negative outlook for the sector heading into 2013. The potential for negative rating pressure persists despite improved financial resiliency among U.S. securities firms. Current ratings have limited upward potential, given the inherent volatility of the capital markets business. Fitch's outlook covers entities focused on investment banking and/or trading. Investment banking units of universal banks are subject to the same challenges. Securities firms will face a number of new regulations with the implementation of Dodd-Frank and other rules. Higher capital standards, restricted proprietary trading, and central clearing of derivatives may result in more conservative risk profiles particularly at large institutions. However, costs to comply with these rules will continue to pressure revenue generation and earnings. The negative outlook is tempered by increased financial resiliency among firms, including improved capital, comfortable liquidity, and more conservative funding mixes. Securities firms have generally reduced overall risk levels and improved risk management practices and systems. Ratings of major firms are further underpinned by government support in the event of need given their G-SIFI status. The full report 'Securities Firms Outlook' is available at 'www.fitchratings.com.' Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: 2013 Outlook: U.S. Securities Firms
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