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Prop till you drop?

Their stock prices have risen, their bonds have tightened, and now they've recorded a couple of good sets of quarterly earnings. One or two even managed record or near-record earnings for the second quarter. So far it has been a good year for US investment and universal banks. Are they finally putting three years of pain behind them?

Bank executives won't commit themselves. They've been caught out in the past predicting upturns and corporate restructuring, or bragging about deal pipelines based more on wishful thinking and wistful conversations than hard, fee-paying mandates.

It's been left to the Securities Industry Association to beat the drums of optimism. Frank Fernandez, the SIA's chief economist and director of research, issued a report at the end of July entitled "Turning the corner", in which he said that "the three-year decline in the securities industry appears to have come to an end as top-line revenue growth resumed, and the sources of this revenue growth broadened beyond just the fixed-income side of operations". Profits are rising and should remain strong in the near term, he continued, and "compensation is rising and employment gains are expected for the industry as a whole by year end".

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