Financial performance for securities firms deteriorated significantly in 2022 and Q1/2023, due mainly to macro headwinds and higher interest rates. The surge in corporate bond defaults poses substantial asset, funding, and liquidity risks to firms active in underwriting and distributing corporate bonds. Profitability will remain weak over the next 12-18 months until market conditions and investor confidence recover. Nonetheless, most firms have sizable loss absorption buffers from recent capital raises to cope with the downside risks.
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