UBS dealmakers’ fees surge by 70% as trading boom ebbs

UBS’s investment bank brought in fees nearly 70% ahead of last year during the second quarter, due to a surge in mergers and acquisitions work. 

The 68% gain in UBS’s global banking unit to $881m was ahead of its Wall Street rivals, thanks to a 223% increase in M&A fees, which it said “outperformed the global fee pool in all regions”. Ralph Hamers, UBS’s chief executive said the M&A fees were the “highest on record”.

The Swiss bank’s second-quarter results followed a similar pattern to its Wall Street rivals — investment banking fees surging while trading revenues cool. UBS’s fixed income unit slipped by 56% to $373m, but a 23% gain within its much larger equities trading unit meant overall markets revenues were down by just 14% to $1.6bn. Its investment bank profits were $668m, up by 9% on the previous year.

Dealmakers have come to the fore in the second quarter amid a drop off in trading revenues that surged during the Covid-19 pandemic. Investment banks brought in record fees of $60bn in the first half of 2021, according to data provider Dealogic.

READ Wall Street bankers shine again as record fees offset trading slump

The bank also booked an $87m loss from the exit of its remaining positions related to the collapse of Archegos Capital. UBS unveiled a surprise $774m loss from trades linked to the family office in the first quarter.

Overall net profits at UBS were $2bn, up by 63% on the same period last year and ahead of analyst expectations as most business lines improved. Revenues of $9bn were up by 21% on the second quarter of 2020. 

“Our growth in the second quarter was underpinned by the relationships we have built and strengthened throughout the pandemic and by the trust our clients placed in our people and in our firm,” Hamers said in a statement. “All business divisions and all regions contributed to our results.”

Hamers took over from long-serving chief executive Sergio Ermotti in September last year and has pivoted the business away from investment banking towards its more profitable wealth management unit. Hamers has also been using technology to cut costs. 

Hamers said on a call with analysts that the investment bank was an “integral part of our strategy” and said UBS would look to expand in Asia and the US as it “expects activities will be higher in those two regions”.

“You can expect us to focus on those regions, if it comes to fuelling extra growth,” he said.

READ JPMorgan’s investment bank slips by 19% as trading boom wanes

M&A has been a particular bright spot across the sector, with gains of 52% and 83% at JPMorgan and Goldman Sachs during the second quarter amid record or near all-time high investment banking fees. 

UBS ranked 10th by investment banking fees with $1.3bn during the first six months of the year, according to Dealogic. While it ranks sixth for M&A fees in Europe, the Middle East and Africa, it remains outside the top 10 globally.

In 2019, UBS combined its equity and debt capital markets units. In the second quarter, its capital markets business made $581m, a gain of 35%.

To contact the author of this story with feedback or news, email Paul Clarke

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