NEW YORK--(BUSINESS WIRE)-- Credit conditions will remain challenged for U.S. securities firms in 2012 as a result of earnings pressure emanating from global economic conditions and regulatory developments, according to Fitch Ratings. Credit ratings across Fitch's U.S. securities firm portfolio incorporate weak fundamentals, and many ratings are below pre-crisis levels.

Fitch expects that trading could continue to be volatile in 2012 because of stress in Europe and continued market uncertainty. Investment banking activity will also be pressured as client firms may have limited opportunities to access the capital markets. Weak and uncertain markets may also dampen M&A activity and thus related M&A revenues.

Securities firms subject to the Volcker Rule have already eliminated most proprietary trading operations, which may reduce earnings volatility. New regulations over the long run will likely lead to higher capital which will have positive benefits for the business. However, in the near- to intermediate-term, Fitch believes additional regulation will add costs for compliance, particularly as it relates to infrastructure development, pressuring earnings.

Fitch expects that securities firms will maintain stable leverage and capital levels, with some improvement possible as firms seek to ensure market access and protect against ongoing volatility.

Fitch currently has Stable Outlooks on 90% of its rated U.S. full service securities firms. Overall, Fitch does not believe there is significant upside to the U.S. securities firms' ratings given aforementioned market conditions. On December 15, Fitch took negative rating actions on the global trading and universal banks (GTUBs), including Goldman Sachs and Morgan Stanley.

The full '2012 Outlook: U.S. Securities Firms' is available at 'www.fitchratings.com.'

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: 2012 Outlook: U.S. Securities Firms

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=662029

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