Stellar returns
The market may be in the doldrums, but you wouldn't know it from Wall Street's own numbers
Profit gusher. Wall Street loves a good story about a successful industry or firm. But that penchant evidently doesn't extend to itself, as several large firms declined or ignored requests to speak with U.S. News about their soaring profitability. Still, the results can be seen in recent earnings reports. Merrill Lynch: "Record first-half earnings." Goldman Sachs: "Best quarterly results." Morgan Stanley: "Record revenues [and] impressive market share gains."
Trading gains, together with swelling commissions and fees, underwriting revenue, and asset management charges, have paced the industry's recovery. Underwriting revenue, for example, was $5.2 billion in the first quarter, up 43.6 percent from a year earlier, on the strength of debt issuance and a rebound from the moribund level of stock issuance last year. Commissions and fees, such as on stock trades, reached $13.2 billion, up 35.2 percent from a year earlier, reflecting a rebound in trading activity. New York firms have also received hundreds of millions of dollars in government aid following the 9/11 attacks.
That the extraordinary profits aren't trickling down can be seen at the industry's epicenter, in lower Manhattan, and across the nation alike.
Take the New York City commercial real-estate market, a key place for reading the pulse of the securities industry. Only recently has activity finally shown signs of picking up, as firms have worked through empty "shadow space" they were saddled with post-bubble, says M. Myers Mermel, chief executive of TenantWise, a New York commercial real-estate and consulting firm. But Mermel says he won't be ready to pronounce things have turned unless talk translates into action and more firms sign deals later this year. "There seems to be more confidence, especially in the last month," he says. But "it's hard to quantify this sense we're feeling. We could be wrong." So far, he says, those regaining jobs appear to be mostly senior-level workers, who have been unemployed or ventured into different fields after being laid off.
Cautious hiring. Another good vantage point is at the start of the recruiting pipeline--the nation's top business schools. Today, M.B.A. students and graduates say it's clear recruiting is looking up. Nevertheless, many students aren't getting first-choice jobs, and pay packages, while generous by most workers' standards, aren't racing ahead.
Thymios Kyriakopoulos, 28, who recently graduated from the University of Pennsylvania's Wharton business school, considers himself fortunate after landing a job trading interest rate options with Goldman Sachs in London. But many classmates weren't so lucky, he says: Of some 75 fellow students looking for jobs at so-called tier-one firms, only about 15 were successful. When Joanna Kartalis, 27, entered Duke University's Fuqua school a year ago, she and her classmates worried about job prospects after having watched so many layoffs. Now ensconced in a summer internship with Banc of America Securities, Kartalis says she's feeling less apprehensive but adds: "I certainly hope there'll be even more improvement."
Internships, in fact, are a sign of the cautious mood. Less willing to commit to standard hiring, firms are instead relying more on what's known as the "10-week job interview," in which the players size each other up much more closely. "Firms are more reluctant to rely solely on interviews to give students full-time job offers," says Meghan Kelly, 28, another recent Wharton graduate. "They want to see firsthand the quality of your work, how you perform under stress, and how you fit into the culture." Reflecting this, the portion of Duke M.B.A.'s doing their internships on Wall Street is up about a third this year, says Sheryle Dirks, director of the Career Management Center. "That's what we've heard consistently: 'We're focusing on our intern hires,' " she says.
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