LONDON, April 28 (IFR) - UBS’s decision to reduce its fixed
income trading business in favour of equities, underwriting and
advisory work showed further signs of being a winning formula in
the first quarter as its investment bank reported a 12%
year-on-year rise in revenues to SFr2.1bn (US$2.12bn).
Equities has proved tricky for most major investment banks
recently but UBS said revenues rose 2% to SFr934m. On the
primary side fees from equity capital markets bounced back from
a very weak quarter a year ago, surging 64% to SFr252m.
“We had a good performance in primary markets year on
year,” said Kirt Gardner, chief financial officer. “We had a
nice rebound off a low base last year. [In APAC] We saw
improvement in equity derivatives business and our prime
brokerage had a strong quarter.”
The bank also benefited from the recovery in debt capital
markets appetite, with fees up 45% to SFr210m. Advisory also
performed well, showing a 26% increase to SFr166m. Overall,
corporate client solutions, encompassing advisory and
underwriting, rose 51% to SFr718m.
UBS now plays the fixed income secondary markets with an
asset-light model. That meant it missed out on the general
strong improvement in trading conditions here. Revenues fell 6%
to SFr452m, with the bank blaming, like others, lower volatility
and client activity in FX and rates.
However, this was less of a problem than at other firms
since it accounts for only a quarter of overall investment bank
revenues now. In turn the reduced investment bank itself makes
up 28% of group revenues.
But the unit is more profitable than many franchises and
made a 21% return on attributed equity, up from 13.1% a year
earlier as it focused on cost reduction.
Direct headcount reduction year-on-year in the investment
bank was 7%. However, this was not reflected in the earnings
statement, with personnel expenses up 12% in the division to
SFr818m in the quarter, because of higher bonuses.
Speaking about the overall group, chief executive Sergio
Ermotti said: “We are not managing on head count but on costs.
You will see some headcount come back into the organisation as
it was outsourced previously.”
Looking ahead he remained cautious. “There is no real
normalisation yet. The only thing we see as a constant is
clients have better sentiment and willingness to invest. In the
financial markets business we need to see something more
concrete,” he said.
(Reporting by Christopher Spink)