NU Online News Service, Feb. 14, 10:10 a.m. – As the effect of the equity bubble burst lingers, the equity brokerage industry continued to experience weak revenues and earnings during fourth-quarter 2002, reports Standard and Poor’s, Inc., the New York corporate rating service.
For instance, Goldman Sachs Group Inc., had net revenue of $2.9 billion during the fourth quarter, marking its weakest quarter in three years, S&P observes. The same is true for Merrill Lynch, where net revenue in the quarter was 44% lower than in first-quarter 2000.
Still, thanks to extensive cost-cutting, brokers were able to post profits, S&P says. The steepest cuts were in compensation, due to both staff and bonus reductions.
But S&P thinks the industry is reaching the point where further cuts could compromise brokers’ competitiveness.
“The outlook for the industry remains cloudy,” S&P says in a report. “Current ratings anticipate a certain degree of weakness, and the fourth-quarter results were in line with this expectation. The continuing downward trend in revenues, however, presents a major challenge.”