Big Profits Forecast for Wall Street Firms in ’03

This year is likely to be the third-most profitable ever for Wall Street firms, but they will earn less than previously thought, the Securities Industry Assn. said Tuesday.

The Wall Street trade group said pretax profit for New York Stock Exchange member firms probably would total $15 billion, more than twice the $6.9 billion earned in 2002, helped by a tight leash on costs.

The association earlier this month forecast that profit would top $16.3 billion, down from its October prediction of $22.5 billion. Wall Street earned $21 billion in 2000 and $16.3 billion in 1999, it said.

Frank Fernandez, the trade group’s chief economist, said the latest estimate reflects declining profits from bond trading and was made after some Wall Street investment banks this month reported results for the fiscal quarter that ended in November.

“The second quarter was so exceptionally good [for bond trading], and that was not sustained; growth in fixed-income trading and issuance started to tail off,” he said. “But the exact opposite is happening in equities. Issuance was in many areas virtually nonexistent in the first half, but picked up strongly.”

Industrywide, gross revenue for 2003 is expected to total $142 billion, down 4.5% from 2002 and the third straight annual decline, the association said.

The trade group, however, is optimistic about 2004. It cited growing investor appetite for riskier investments, and an increased willingness among companies to conduct equity offerings after major U.S. stock indexes posted double-digit percentage gains in 2003.

Industry payrolls may already reflect optimism about 2004. Securities industry employment rose in November to 803,500 from October’s revised 800,500, after bottoming in May at 793,700, Labor Department data show. Employment peaked at 840,900 in March 2001.