From the May 2007 issue of Boomer Market Advisor • Subscribe!

Securities industry profits break records in 2006

In another sign of the strong economy, the Securities Industry and Financial Markets Association reported in April that the U.S. securities industry had a record-breaking year in 2006. The industry reported full-year profits of $33.1 billion - 88.2 percent above the $17.6 billion earned in 2005, and 4.7 percent above the previous record of $31.6 billion in 2000.

The fourth quarter's pre-tax profits of $11 billion were 55 percent above the preceding quarter and 158 percent above results earlier in the year. The increase in profits in the fourth quarter occurred while both quarterly gross revenues and expenses hit record high levels.

Exceptionally strong trading gains and record underwriting revenue led the industry's performance. Some highlights include:

  • Trading gains rose to $12 billion, a 10 percent increase from $11 billion in the third quarter and 106 percent from $6 billion in the fourth quarter of 2005. For the year as a whole, securities firms reaped $43 billion in trading gains, 85 percent above 2005's level of $23 billion.
  • Gains from investment accounts also had a strong quarter, recording gains of $1.9 billion, up 56 percent and 166 percent over $1.2 billion the previous quarter and $0.7 billion earlier in the year. Gains reached $5.5 billion for the year as a whole, up 94 percent over 2005.
  • Underwriting revenue of $7.4 billion in the fourth quarter was the highest quarterly total in that revenue line for the year, 55.2 percent higher than $4.8 billion in the third quarter and 34 percent above $5.5 billion in the same quarter in 2005. For 2006 as a whole, underwriting revenue reached a record $23.6 billion, an increase of 18 percent over 2005's $20 billion.

Fund management operations also put in a steady performance, reflecting increasing net asset values and net inflows into mutual funds during fourth quarter and the year as a whole.

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