Merger and acquisitions activities in Europe posted sharp recovery of 71 percent growth in June, according to a recent report compiled by Goldman Sachs Group, Inc. (NYSE:GS).
Martin Leitgeb and team at Goldman Sachs Group, Inc. (NYSE:GS) in their equity research report for June on European banks note recovery in Europe’s M&A activity, thanks to strong increase in announced M&A volumes posting 71 percent growth to € 63 billion.
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Best year for Europe’s ECM since 2009
Goldman Sachs Group, Inc. (NYSE:GS) analysts observe the year 2013 saw Europe’s equity capital markets issuance maintaining its momentum in June, as the year-to-date issuance rose 55 percent as compared to the previous year. However, ECM issuance for June saw a slight blip at €14 billion against strong issuance level of €19 billion seen in May.
Enthused by the performance of Europe’s equity capital markets, the analysts predict at the current pace, 2013 could be the best year for ECM since 2009.
However, Martin Leitgeb and team note decline in Europe’s debt capital markets as the June issuance declined by 45 percent to €83 billion. The analysts feel the decline was accentuated by both lower sovereign issuance and corporate issuance. With the spike in spreads, high yield issuance dropped 66 percent in June.
The following table captures the overall M&A scenario in Europe for June 2013:
Improved equity trading volume
Goldman Sachs Group, Inc. (NYSE:GS) in the research report find cash equities’ trading volume increased by 4 percent on month-on-month basis. The analysts feel the volumes in rates posted substantial rise of 29 percent month-on-month possibly aided by spike in long-term rates.
The analysts point out that primary equity issuance posting strong performance this year as against the tepid performance recorded by the cash equities trading volume.
However, FX trading volumes remained broadly flat. Similarly, trading volumes in equity derivatives contracted 7 percent in June.
Martin Leitgeb and team observe major European equity indices seeing sell-off in June, by closing on average 7 percent lower.
UBS – pick among European banks
Goldman Sachs analysts observe drop in the private banking indicator by 2.2 percent, aided by a decline in both equity and bond valuations, besides strengthening of the Swiss Franc.
Martin Leitgeb and team at Goldman Sachs Group, Inc. (NYSE:GS) pick UBS AG (NYSE:UBS) among European investment banks aided by the bank’s gearing towards improving markets through its private bank. The analysts have assigned ‘buy’ rating on UBS, to reflect their latest PBI reading and IB revenue trends.
However, Goldman Sachs analysts cautions UBS AG (NYSE:UBS) might be affected by worse than anticipated capital markets performance, net new money flows and impact of regulatory changes.
The following table captures Goldman Sachs view on European Investment Banks:
Yesterday, UBS AG (NYSE:UBS) reported higher second quarter profit for 2013 despite concluding an in-principle agreement with U.S. housing agencies to settle mortgage claims. The Zurich-based bank attracted the most customer money in six years during the first quarter.