A large burst of layoffs likely.
Revenue from the once lucrative fixed-income trading business has fallen sharply in recent years and analysts say it will never recover to its peak levels.
MarketWatch reports that in the first quarter of 2014, major banks generated revenue from fixed income, currencies and commodities, known by the acronym FICC, of $22bn, down 37% from the $35bn generated in the same quarter of 2010, according to research firm Coalition.
Revenue from FICC accounted for 50% of total revenue in the quarter, down from 63.5% in the first quarter of 2010, according to Coalition.
There are two main reasons for the slump. First, the regulatory regime that has been put in place since the 2007-8 crisis has brought major changes to how banks do business. Tougher capital requirements have significantly eroded profit in business areas such as FICC and forced executives to make tough decisions on capital deployment.
There is little optimism that trading activity will pick up in the short term. Gary Goldstein, co-founder and chief executive of Whitney Partners, a New York executive-search firm, predicts a large burst of layoffs will happen in September.
'In this case, Wall Street has probably waited too long (to make cuts)', said Goldstein. 'I think they're still too heavy in terms of their head count and cost structure'.
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