Oct 22 After a strong start to the year, Wall Street firms are likely to see their profitability slow in the remainder of 2013, setting the industry up for its worst year since 2011, according to a report by the New York State Comptroller's office.
The report forecasts that profits generated the broker-dealer operations of New York Stock Exchange member firms could fall to $15 billion in 2013 from $23.9 billion in 2012 as higher interest rates, litigation costs, and the government shutdown weigh on business.
"Profits for the first half of 2013 of $10.1 billion were close to the pace of 2012 but appear to be slowing," the report said.
The state Comptroller's office has access to a range of financial data from companies that do business in the state. It uses this to monitor trends in the securities industry, which is a major source of income and employment for both state and city.
Following two years of record losses in 2007 and 2008, the securities industry had four years of profitability buoyed by low interest rates, including three years of record profits.
The report shows the securities industry continued to streamline this year. Industry jobs fell to 163,400 in August 2013, a 13.5 percent drop from pre-crisis levels. The report suggests the industry will contract further as it adapts to changing regulatory and economic environments.
Total compensation for the broker-dealer operations of member firms of the New York Stock Exchange increased by 5.5 percent during the first half of 2013. Although this suggests bonuses might be higher again this year, recent trends have cast doubt on this, the reports said.
The Comptroller's office uses tax data to estimate bonuses for the previous year in February. In February 2013, it estimated that the cash bonus pool for securities industry workers in New York City paid during the bonus season grew by 8 percent to $20 billion.