Summer Of No Volume Will Crush Wall Street Profits

As Q3 earnings draw closer, the effects of a summer with anemic trading volumes, and a moderating recovery, will come sharply into focus, as it regards to Wall Street profits.

The New York Times takes a look, this evening, at the ugly profit picture facing Wall Street’s biggest banks:

As a result, executives, portfolio managers and analysts say that even the mighty Goldman Sachs, which posted a profit every day for the first three months of the year, is unlikely to deliver the kind of profit growth that investors have come to expect. Keith Horowitz, a bank analyst with Citigroup, said he expected Goldman Sachs to earn $7.8 billion in 2010, a 35 per cent decline from the $12.1 billion it made last year.

Instead of making $1.75 billion in the third quarter, or $3 a share, as he had predicted, Mr. Horowitz now expects Goldman’s profit to total $1.34 billion, or $2.30 a share. At Morgan Stanley, the drop was even steeper, with earnings expectations revised downward to $140 million, or 10 cents a share, from $726 million, or 53 cents a share.

This will definitely have an effect on jobs, and as the below chart of financial industry employment in New York and surrounding areas shows, there was an uptick in hiring earlier this year. This could easily reverse itself (to some extent) in the coming months.

financial new york

Photo: St. Louis Fed

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