Investment banks face a sharp drop in profitability

[ASusilovic]

LONDON (MarketWatch) -- Investment banks face a sharp drop in profitability due to the global crackdown on capital standards and other rule changes, which could lead to hefty pay cuts in the sector as firms struggle to restructure, according to analysts at J.P. Morgan.

After looking at the likely impact of eight proposed regulatory reforms the broker slashed its forecast for 2011 return on equity -- a key measure of profitability for the investment banks -- to around 11% from 15%.

The lower outlook is mainly due to higher capital requirements for trading activity, but there will also be an impact from new transparency requirements for derivatives and from limits on the positions firms can take in commodities, said analyst Kian Abouhossein in the note.

Shareholders are unlikely to stand for such low returns, forcing banks to cut pay and bonuses and to make further staffing cuts to lift returns back to around 15%, he added.


http://www.marketwatch.com/story/banks-may-cut-pay-as-new-rules-hurt-profitability-2009-09-09

Hum...let's wait for Q2 results and then short GS, MS, BAC....the usual suspects....

 

[Debaser82]

Politicians have zero leverage on banks.

Sure they talk but can they do the walk?

 

[ASusilovic]

Quote from Debaser82:

Politicians have zero leverage on banks.

Sure they talk but can they do the walk?

Oh, after banker's stupidity and greed did not find and still does not find an end, you can bet politicians will find a way to present them the "bill" !!!


Blessing told the conference that Commerzbank plans to start repaying this aid by 2012 at the latest, Dow Jones Newswires reported.

Shares in Commerzbank climbed steadily throughout the morning, and were recently up 7.8%.

Blessing also told the conference that the bank is working on a new pay and bonus package for staff, which will give more weight to longer-term incentives, according to the report.

The new plan includes paying a higher portion of management bonuses in stock, with bonuses being put in separate accounts and only being paid out after several years.