[NEW YORK] Wall Street's profits fell in the first half of the year due to fines related to the 2008-2009 financial crisis, a trend that will likely continue for the rest of the year, New York state's top financial watchdog said on Tuesday.
Profits at Wall Street's broker-dealers fell 13 per cent to US$8.7 billion in the first half of 2014, state Comptroller Thomas DiNapoli said in a report based on financial data from New York Stock Exchange member firms. "Wall Street remains very profitable, but earnings may be constrained this year as the industry pays a price for behavior that contributed to the financial crisis," DiNapoli said in a statement.
The state comptroller issues regular reports on financial and employment trends at Wall Street firms because of the importance of the industry to the state's tax take. In the last fiscal year, the industry accounted for almost one-fifth of state tax collections.
In 2013, Wall Street's profits declined 30 per cent to US$16.7 billion due to higher non-compensation costs that included settlements from the financial crisis, the report said. Since the start of 2009, the six largest banks have agreed to pay an estimated US$130 billion in settlements.
Still, the industry has been profitable for the last five years, the report noted.
The report did not give a figure for the exact costs of settlements for the first half of 2014 as firms lump the settlements in with general non-compensation costs.
New York state expects to benefit from US$4.5 billion in settlement payments, much of which has not been budgeted, the report said.
Authorities expect the state's securities-related tax revenue to decline this year from an estimated record US$13.2 billion last year, due to lower capital gains. Last year the state got 17 per cent of its tax revenues from Wall Street while the city got 7 per cent.
DiNapoli said there would likely be a net benefit to the state from the settlements with financial firms.
The report also showed that the financial industry continues to contract, losing 2,600 jobs in the 12 months through August. It estimates New York City's securities industry is 15 per cent smaller than before the financial crisis, employing 162,400 as of August.
Unlike past recoveries, the industry has not helped New York City's job growth during the current recovery. - Reuters