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Wall St. profits already taking hit
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| Contributor | RP |
| Last Edited | RP Sep 22, 2010 01:29pm |
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| Category | Analysis |
| Author | BEN WHITE |
| News Date | Wednesday, September 22, 2010 09:35:00 AM UTC0:0 |
| Description | Third-quarter Wall Street profits are expected to be fairly dismal after trading and mergers-and-acquisition activity took a dive over the summer. And the massive money — at least for bankers at big, publicly traded financial firms — may not be back for years. Or, in any event, not until the next big merger boom begins.
Richard Bove, a veteran banking analyst now with Rochdale Securities, said some of the decline is simply cyclical.
But Bove also believes there has been a fundamental shift that could cut into investment banking profits for years to come: a move away from the complex, structured-debt products that helped drive the crisis in the first place.
And it’s happening well before the financial reforms pushed by Senate Banking Committee Chairman Chris Dodd (D-Conn.) and House Financial Services Committee Chairman Barney Frank (D-Mass.) have had any impact.
Bove also pointed to the disappearance of the high-risk products that proliferated during the boom years, such as “payment-in-kind,” or “pik,” loans that do not require borrowers to pay any principal or interest until maturity. |
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