UBS's M&A bankers had a bad quarter, but someone's getting paid
UBS's second quarter results, released today, suggest that the apparent malaise afflicting the Swiss bank's M&A advisory business has not lifted yet.
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As the chart below shows, revenues in the business fell 19% year-on-year in the second quarter, which was a greater decline than at any rival bank to have reported so far.
The decline comes amidst possible issues in UBS's US investment banking business, which is being run by a large team of senior bankers hired from Barclays, but which has lost market share. The Swiss bank has also been adding M&A bankers this year in the form, for example, of Taylor Henricks from Morgan Stanley, who is joining to head M&A in the Americas. The declines in market share appear due to the Asian business: Dealogic says UBS's M&A revenues grew faster than the overall fee pool in both the US and EMEA.
UBS blamed declining global Q2 M&A revenues on "lower private fund and M&A activity." Private funds presumably refer to financial sponsors (private equity funds). The bank reorganised its global M&A and financial sponsors teams into a single group earlier this month, but let none of its sponsors bankers go. Dealogic says its sponsors revenues have collapsed since a high point in 2021. However, UBS still had the largest M&A advisory business of any European bank in the second quarter.
UBS's combined equity and debt capital markets revenues also fell 24%. The bank doesn't break them out into individual revenue lines, but said higher ECM revenues were offset by lower leveraged capital markets revenues and $65m of leveraged finance related markdowns.
Traders at the Swiss bank, however, did well, with combined global markets revenues rising 26% year-on-year in Q2.
This, in turn, helped drive profits in the investment bank 28% higher, which might explain why UBS said today that it's increased operating expenses in the unit by 7% largely due to "rising personnel costs". Traders will be hopeful that this means they'll get paid. However, it may simply be that UBS is handing out (more) guaranteed bonuses as it tries to shore up its M&A team.
The Swiss bank still has costs to cut. UBS wants to remove $13bn in cumulative costs by the end of 2026 and has so far removed $9.1bn. It has another $900m to go this year. It's already spent $11.1bn integrating Credit Suisse, and expects to spend another $1.4bn this year and $14bn in total by the end of '26.
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