The U.S. Securities Industry Association has lowered its profit forecasts for the American securities business. In a new report, the SIA says that first quarter industry pre-tax profits came in at US$3 billion, about 7.7% below its forecast.

The SIA has lowered it second quarter forecast by 3% to $3.1 billion, and has dropped its full-year estimates 1.5% to $13 billion.

First quarter revenue fell 9% from the fourth quarter of 2001. That’s a drop of more than 30% for teh same quarter in 2001. Revenues are now back down to 1997 levels. “Both gross and net revenue will improve only marginally over te near-term with no meaningful gains expected until at least Q4. If economic conditions and investor sentiment continue to weaken, improvements in profitability will easily recede into late
2003-2004.”

The SIA says the lack of M&A activity, the dearth of IPOs and other financings, sidelined retail investors and making “the near-term outlook not so bright, if not downright dim, for most firms.”

The SIA says that with revenues under pressure, cost cutting is going to be the only way for firms to increase their profitability. “Clearly the 5% reduction in overall headcount on Wall Street since its peak last year now appears to be just a precursor of job cutting to come.” All the easy cuts have come through bonus reductions and hiring freezes so far.