The global outlook for securities firms remains negative for 2017, according to Fitch Ratings’s 2017 global outlook for securities firms report published on Wednesday.
Fitch’s outlook for the securities sector is negative for 2017, “as trading volume is expected to remain episodic,” the report says, and spreads continue to be tight across many trading products. Fitch expects to see gradual improvement in underwriting activity in 2017, absent any large global macroeconomic shocks.
“Securities firms continue to adapt to the business environment and cost cutting remains a clear focus as larger firms rationalize operations and digitize trading platforms,” said Justin Fuller, senior director at Fitch Ratings, in a news release.
With larger firms focused on cost cutting, smaller securities firms “may see opportunities for incremental growth and revenue generation”, the Fitch report says. However, this may also add risk, it adds.
If short-term rates rise, U.S. retail brokers are best positioned, the Fitch report says, as they would likely benefit from net interest margin improvements. And, these firms are continuing to diversify their business models with banking and advice/asset management businesses.
Brexit continues to cause uncertainty for the sector, the Fitch report says, adding the rating agency expects securities firms will ultimately need to reorganize their U.K. and European businesses in response.
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