Two Big Losers As Volcker Rule Could Cut $10bn Off Big Bank Profits

The Volcker rule could cut profit at the biggest U.S. banks twice as much as earlier estimates if regulators take a strict stance on limiting proprietary trading, Standard & Poor’s has said.

'We currently estimate that the Volcker rule could reduce combined pretax earnings for the eight largest U.S. banks by up to $10bn annually, up from our initial $4bn estimate two years ago', S&P said Monday in a statement announcing a new report on the issue.

Bloomberg reports that Goldman Sachs and Morgan Stanley, which were the two biggest U.S. securities firms before converting to banks in 2008, stand to lose the most because they get a larger percentage of their revenue from trading than the other lenders, S&P said in the report. Regulators are unlikely to draft a final version of the rule until the end of 2012, S&P said.

'Less strict rules would have a limited impact on banks’earnings and business positions, so it’s unlikely that we would take any rating actions as a result', S&P said in the statement. 'Stricter rules could lead us to take negative rating actions on certain banks'.

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Volcker Rule May Cut $10 Billion in Bank Profit, S&P Says

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