As European banks start to release their results for Q2 this week, it’s clear that the trend is the same on both sides of the pond – with downwards pressure seeing investment banking revenues plummet.
UBS showed a net profit for Q2 of $2.1 billion, an increase of 5% on the previous year but missing analyst expectations of a 19.8% jump by a substantial margin.
The results were weaker than hoped for, especially given the bank’s surprisingly strong first quarter, which beat expectations on the back of strong performance across its global wealth management business and investment bank, driven by recovery from the Archegos fallout in 2021.
By contrast, the bank struggled in Q2, with global banking revenues falling 57%.
Investment banking revenues fell 14% to $2.1 billion compared to $2.5 billion a year ago, slightly missing analyst expectations of $2.3 billion. By comparison, Goldman Sachs posted a drop in investment banking revenue of 41% earlier this month, while JP Morgan and Morgan Stanley lost 61% and 55%, respectively.
“The second quarter was one of the most challenging periods for investors in the last 10 years,” said CEO Ralph Hamers, warning that the operating environment for the rest of the year remained “uncertain” and that for Q3 so far, “sentiment remains subdued”.
The bank saw $12 billion outflows in its asset management division, primarily in equities, as well as muted performance in its wealth management business, the biggest division in the bank.
Equities, which drive its investment bank, had a particularly terrible quarter, with equity capital markets revenue dropping 83%. Advisory revenue fell 30% and capital markets revenue was down 71%.
However, there were some bright spots. “Institutional clients remained very active, with 10% growth in Global Markets revenues, on the back of high volatility, whereas private investors remained generally on the sidelines,” noted the bank.