UBS’s dealmaking fees tumble by 60%, following Wall Street declines

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UBS’s dealmaking fees slipped by nearly 60% in the third quarter, kicking off earnings season for major European investment banks after a slump at Wall Street rivals.

The Swiss bank’s dealmaking unit posted revenue of $329m over the three months, a decline of 57% on the same period last year and below analyst expectations. Its capital markets unit fell by 63% to $193m, while a 49% drop in M&A fees was sharper than most major US banks.

Like its Wall Street rivals, UBS’s trading business fared better during the third quarter, slipping by just 1% to $1.7bn. Trading revenue has been helped by ongoing market volatility, but major US banks all posted sharp increases in their larger fixed income businesses.

Overall, UBS’s net profit of $1.7bn was ahead of analyst consensus of $1.6bn.

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“The macroeconomic and geopolitical environment has become increasingly complex,” said chief executive Ralph Hamers in a statement. “Clients remain concerned about persistently high inflation, elevated energy prices, the war in Ukraine and residual effects of the pandemic.”

Russia’s invasion of Ukraine, volatile markets and recessionary fears have stymied investment banking activity this year following a record 12 months when dealmakers hauled in $130bn.

Wall Street rivals Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley all reported drops of at least 50% in dealmaking fees during the third quarter, with bank executives including Morgan Stanley boss James Gorman saying they were evaluating headcount.

Deutsche Bank became the first major European investment bank to trim employees on 19 October, when it announced cuts to its origination and advisory business, with Goldman Sachs, HSBC and RBC Capital Markets among other firms to trim their ranks of dealmakers.

Investment banks are under pressure to cut costs after a bumper 2021, with compensation consultants Johnson Associates predicting that some dealmakers could see a 50% slide in bonuses. At UBS, compensation costs for the first nine months of the year are down by 5% to $8.1bn.

UBS has slipped from 10th to 12th in the investment banking fee league tables this year, according to data provider Dealogic. It has made $1bn so far in revenue, less than half the $2.1bn it made at the same point last year.

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

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