Bloomberg

New York

Wall Street firms have failed to keep up with a stock market that has boomed for more than five years, losing ground to industries including technology and health care.

There were just 32 US financial firms among the world’s largest 500 companies by market capitalisation when trading closed on Friday in New York. That compares with 41 at the end of 2006, the last full year before the credit crisis. Some companies that remain on the list, like Citigroup Inc and American International Group Inc, have shrunk to a fraction of the size of tech giants like Apple Inc and Google Inc.

Goldman Sachs Group Inc has a lower market value than its peak in 2007. While Google and Cupertino, California-based Apple have been adding new products and customers since then, Wall Street lost trading revenue and spent much of that time repaying bailouts, settling government probes or divesting assets under pressure from federal watchdogs.

“The culture in the large banks needed to be corrected,” Charles Peabody, a banking analyst at Portales Partners in New York, said in a phone interview. “That is a good thing. The extent of this adjustment process has been a lot more drawn out than any of us anticipated, and that’s not been a good thing.”

Goldman Sachs went public in 1999, the same year that President Bill Clinton signed into law the repeal of barriers between commercial and investment banking. Market capitalisation as of December 18 dropped about 21% from the peak in October 2007 of more than $105bn.

Financial firms that fell off the list include Lehman Brothers Holdings Inc, which filed for bankruptcy protection in 2008, and Merrill Lynch & Co, which struck a deal the same year to sell itself to Bank of America Corp. The US group now makes up about 8.1% of the market value of the world’s largest 500 companies, compared with 9.7% at the end of 2006.

US healthcare’s share climbed to 7.6% as Johnson & Johnson and Amgen Inc expanded. US technology advanced to 7.5% from 5.3%. Apple is the world’s largest company, up from No 98 at the end of 2006.

Goldman Sachs dropped to 94 from 63 in that span. David Wells, a spokesman for the New York-based bank, declined to comment.

Citigroup, which was the first US lender to adopt the universal banking model, has plunged to No 35 from fourth. Wells Fargo & Co, which derives most of its revenue from consumer, corporate and real estate lending, is now the most valuable bank in the world.

“Wells is one of those organisations that show their ability to execute” and produce a higher return on equity than competitors, Peabody said. “Revenue growth has been lacking as a generality in the banking industry. Wells has been doing a better job, in part because it’s not as exposed to the capital markets.”