Wall Street corporate profits are eroded by the turbulence caused by the crisis in Greece, after bankers and traders had hoped that the first quarter of 2012 will be the time for recovery, according to Bloomberg. For the third consecutive year, income from investment banking and trading operations of U.S. financial companies would decline by at least 30% in the second quarter, compared with the first three months of this year, estimated Richard Ramsden, an analyst at Goldman Sachs.
Greece was the main reason for a worse second quarter for financial companies in the past three years. Volume of the transactions was lower and stock and bond markets fell due to investor fears that Greece will give up the euro, and the debt crisis will extend to other countries like Spain and Italy. These problems have led to decreased profits, bonuses and job numbers at the financial companies on Wall Street, in the second half of last year, and is likely to have a similar effect this year.
“It will be a difficult summer at least, seems to be a repetition of the last two years. Banks’ market values are too low, but investors say they will not be fooled,” said David Konrad, an analyst at KBW, cited by Bloomberg. Greek problems amplify the impact of the stricter rules on capital and trading restrictions imposed on banks after the 2008 crisis. These measures are already fueling fears that the financial sector could be locked into a long decline.
Analysts polled by Bloomberg anticipated that income from investment banking and trading of the five biggest banks on Wall Street, JP Morgan Chase, Goldman Sachs, Bank of America, Citigroup and Morgan Stanley, will drop in April-June for the seventh time in the last eight quarters. The five banks have generated revenues of approximately 33 billion dollars from these operations in the first three months of the year.
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