Wall Street is facing a gloomy reality

pulse

September 11, 2017 6:49 PM

Citigroup said Monday that it expected a 15% decline in trading revenues — a dark sign for Wall Street.

It couldn't have started out much better for Wall Street in 2017.

First-quarter revenues boomed, ginning up hopes that a moribund 2016 was the end of a steady, four-year decline for banking.

The scorecard: $42 billion in first-quarter revenues at the top-12 banks, including $21.4 billion from fixed income trading — a 14% and 20% increase, respectively,

But high hopes have since been reined back in.

At an investor's conference on Monday, Citigroup CFO John Gerspach said the bank was on pace for a 15% year-over-year decline in trading revenues for the third quarter. A Barclays analyst estimated that all of Wall Street would see a 12% trading decline.

While the quarter still has to play out, a 12% decline across the Street would put third-quarter trading revenues at $27.2 billion, $3.3 billion less than the $30.9 billion the top-12 banks earned in the quarter last year, according to Coalition data.

The dismal projections — which follow a weak second-quarter — indicate the industry malaise may be no closer to its end.

Though deals activity has surged this year, it's unlikely to overcome the drop in trading, which accounts for a much larger share of revenue.

Here's a rundown of the troubling state of Wall Street in 2017 thus far:

business on Wall Street regressed in the second
Wall Street was up 4%

The blame for the decline in trading has largely been ascribed to record-low market volatility. 2017 just hasn't had the surprising whipsaw market moments that 2016 did, such as Brexit and the election of President Donald Trump.

That could change in an instant, and banks could see a trading resurgence in the latter half of the year.

But if the trend from the second and third quarters carries over to the fourth, that strong first quarter will be remembered as an outlier, and banks will be hurtling toward a fifth consecutive down year.

pulse

Enhance Your Pulse News Experience!

Get rewards worth up to $20 when selected to participate in our exclusive focus group. Your input will help us to make informed decisions that align with your needs and preferences.

I've got feedback!

JOIN OUR PULSE COMMUNITY!

Unblock notifications in browser settings.

Eyewitness? Submit your stories now via social or:

Email: eyewitness@pulse.ng