European Investment Banks’ Revenue Rebounds in September


UBS AG (NYSE:UBS) analysts Daniele Brupbacher, John-Paul Crutchley and Mate Nemes see a slightly optimistic picture for revenue at investment banks during September 2013.

European Investment Banks' Revenue Rebounds in September

Q3 outlook for revenue

However, despite the improvement in September, Q3 is likely to be a weak quarter for investment banks.

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Segment-wise revenue trends forecast for Q3 are summarized below:

FICC: -19% (y/y), -11% (q/q)

Equities: +5% (y/y), -20% (q/q)

IBD: -4% (y/y), -16% (q/q)

(Banks included: Barclays PLC (NYSE:BCS) (LON:BARC), Credit Suisse Group AG (NYSE:CS), Deutsche Bank AG (NYSE:DB) (ETR:DBK), BNP PARIBAS (BIT:BNP) (EPA:BNP) (OTCMKTS:BNPQY), Societe Generale SA (ADR) (OTCMKTS:SCGLY) (EPA:GLE), Bank of America Corp (NYSE:BAC), Citigroup Inc. (NYSE:C), JPMorgan Chase & Co (NYSE:JPM), Goldman Sachs Group Inc (NYSE:GS), Morgan Stanley (NYSE:MS))

Key market drivers – FICC

USD and EUR yield curves flattened their trajectories somewhat in September, though interest rate volatility remained high due to the non-taper by the Fed. Focus on the political problems in Washington, German elections and Italy’s political crisis put credit trading volumes under pressure, though these were marginally better than in August.  However, according to UBS, “sequentially higher rates volumes (both MoM and QoQ) fell short of offsetting the drop in credit revenues, pointing towards weak Q3 13 revenues in Fixed Income sales and trading,” a view echoed by other banks.

Though CME FX volumes rose 14%, overall currency trading volumes and volatility were lower in September.

Equities better off

Equity trading volumes were seen to be higher in September on the NYSE Euronext (NYSE:NYX), London Stock Exchange Group Plc (LON:LSE), EURONEXT 100 (INDEXEURO:N100) and Liffe. With VIX at 15, equity revenues are expected to remain solid. U.S. Equity funds saw good inflows while option trading volumes rose 10% in September in the U.S. Overall UBS are “still positive” on equities.

ECM, DCM and Advisory

All three areas showed improvement in September compared to the previous month but volumes were down on a quarterly basis. Debt Capital Market volumes were up 51% over August, but are down 17% compared to Q2. Equity Capital volumes were robust – up 109% versus August, but down 25% q/q. However, macroeconomic issues are a source of risk here. Big ticket transactions helped boost Advisory volumes 73% over August, and up 25% for the quarter.


UBS: “Based on trading volumes and comments from the banks, we see downside risk to some of our Fixed Income revenue forecasts as well as upside risk to some of our Equities revenue estimates. We think our numbers are still below the sell side consensus, so consensus forecasts could fall in the coming days.”