UBS’s investment banking fees fell almost 60% in the second quarter, a bigger drop than Wall Street rivals, as European lenders brace for a hit from a slump in the recruitment
The Swiss bank reported revenue of $377 million in its global banking unit in the third quarter, a 57 percent decline from a year earlier and a steeper decline than analysts had expected.
UBS is the first European investment bank to report its second-quarter results, a period expected to be even tougher than it was for the American companies that dominate the business league tables.
Its M&A fees fell 30% to $209 million, while capital markets revenue fell 71% to $168 million.
UBS’s overall profit was $2.1 billion in the quarter, up 5% but still below analysts’ expectations of $2.4 billion.
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“The second quarter was one of the most challenging periods for investors in the last 10 years,” UBS chief executive Ralph Hamers said in a statement. “Inflation remains high, the war in Ukraine continues, as well as strict Covid policies in parts of Asia. In these uncertain times, our clients rely on our powerful ecosystem to navigate the markets and invest in long term”.
All Wall Street banks have reported sharp declines in trading income after fees soared to a record $130 billion last year. JPMorgan and Morgan Stanley reported declines of around 55%, while earnings fell 41% at Goldman Sachs.
Banks have responded by switching from aggressive hiring days to slowing hiring or cutting costs. Goldman executives said they were slowing hiring and reintroducing the bank’s annual review of underperformers, which typically sees 5-10% of staff leave each year. Both Goldman and Morgan Stanley have also cut compensation in the first half of 2022.
UBS said it had cut variable compensation within its investment bank, helping it cut expenses by 5% to $1.7 billion.
In the second quarter of last year, UBS’s M&A fees rose to an all-time high, a 223% increase. A 68% increase in global banking revenue outpaced Wall Street rivals.
TO READ UBS investment banking fees fall 30% as deals slow
UBS cut some bankers in Europe in March, but has also been hiring. It took over from Barclays head of capital markets for EMEA Manuel Esteve in April, Financial News reported, while Josiane Fanguinovény and Viv Sedov joined its newly created advisory unit ESG
Wall Street banks have managed to offset a sharp decline in trading fees with strong trading income, with Goldman Sachs posting a 55% year-over-year increase and JPMorgan up 15%.
Revenue from UBS Global Markets was $1.7 billion in the second quarter, up 10% from a year earlier. However, it posted an $87 million loss on its exposure to collapsed family office Archegos Capital in the second quarter of last year. Excluding this loss, trading commissions were up 4%.
To contact the author of this story with comments or news, please email Paul Clarke
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