April 23, 2018 / 11:22 AM / a year ago

UBS trails US peers in Q1 equities surge

LONDON, April 23 (IFR) - UBS’s investment bank outperformed most US peers in advisory and underwriting during the first quarter but did not benefit as much from the surge in equities trading that others reported.

The group’s corporate client solutions unit, which includes equity and debt capital markets as well as M&A fees, saw revenues rise 15% to SFr825m (US$844m) from a year earlier. In US dollar terms that would have been a 22% increase.

That outstripped the top two performing US banks, Goldman Sachs and Morgan Stanley, which reported increases of 5% and 7%, respectively, in their advisory and underwriting areas.

The three major balance sheet banks in the US, JP Morgan, Bank of America Merrill Lynch and Citigroup, all saw declines in their equivalent divisions.

In equities, UBS’s biggest division within its investment bank, revenues rose 17% to SFr1.1bn. That left it trailing the US banks, which cumulatively reported a 34% rise year-on-year to US$9.5bn.

However the Swiss bank said in US dollar terms it would have seen a 25% increase and chief financial officer Kirt Gardner also noted that it did not include equities derivatives written for corporate clients.

“If we did not report corporate derivatives in CCS [corporate client solutions] like peers then equities would have been up 32%,” he told analysts. That was still behind Goldman Sachs, BAML and Citigroup, which all reported 38% increases.

The Swiss bank has reduced its activities in fixed income and other non-equities trading meaning the problems most banks experienced in this area did not hurt UBS as much.

The five US banks saw their fixed income revenues cumulatively rise only 2%. At UBS its FX, rates and credit business saw an 11% decline to SFr400m. Even on a US dollar basis, the 6% drop year-on-year was worse than most.

On the primary side, M&A fees revived, seeing a 10% rise year-on-year to SFr194m but DCM dropped 9% to SFr106m and ECM slid 27% to SFr118m, as the busy activity seen in the first quarter of last year in Europe was not repeated.

That was the opposite of Goldman Sachs for instance, which last week reported a 22% fall in M&A fees but strong increases of 32% and 25% in ECM and DCM fees, respectively. Other US banks saw a more mixed performance.

“Our investment bank delivered an excellent quarter, with a particularly strong performance in Asia-Pacific,” said Gardner.

Looking ahead he indicated that the bank wanted to expand its M&A business.

“We have invested and this gives us scope to grow our M&A business particularly in the US,” said Gardner. “Our goal is to be the best investment bank, not the biggest, by choosing to focus on businesses where we can compete. 2018 has started well.”

Chief executive Sergio Ermotti remained cautious on trading. “January was very exuberant but February and March were more similar to 2015 and 2016. You can feel more geopolitical tensions, which may start to somehow dent the confidence of clients.” (Reporting by Christopher Spink)

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