Global investment banking revenues to plunge SP

The worldwide financial crisis will take a heavier toll on global banks and brokers than previously expected, pushing investment banking revenues down by 50 percent to 60 percent from 2007 levels, Standard & Poor's said on Thursday.

Despite sweeping government interventions, many parts of the financial markets remain closed for now and restoring confidence will be a "long-term process," S&P said in a report.

Investment banking revenues are already down about 33 percent year-over-year, with little hope of improvement, the rating agency said. Sales and trading revenues for banks and brokers will likely fall 30 to 40 percent, it said.

Previously, S&P had forecast a 20 to 30 percent decline for investment banking, sales and trading revenues combined.

"We expect another contraction of revenues from securities businesses and predict that fourth-quarter 2008 will be a very difficult one for the industry, and maybe even worse than the third quarter," S&P said.

Global investment banks and brokers could operate for at least the next few quarters without access to new unsecured financing if necessary, S&P said.

"Most banks and brokers are still benefiting from extensive term funding raised from mid-2007 through August 2008, and universal banks were generally able to attract higher retail deposits," it said.

Government interventions also appear to be easing the turmoil in the credit markets, the rating agency said.

The conversions of Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) and Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) into bank holding companies is also a positive development, but is unlikely to be a panacea, it said.

"We view the Federal Reserve's approval of this change as a strong signal of systemic support, and the companies should benefit from the protective oversight that comes with direct regulation by the Fed," the agency said.

http://www.reuters.com/article/marketsNews/idUSN1338040220081113

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Global investment banking revenues to plunge SP