It’s results time for Deutsche Bank and for UBS. Deutsche Bank’s results are available here. UBS’s results are available here. If you lack the time to study each bank’s release in detail, this is what you need to know.
1. UBS has been vindicated in its decision to slash fixed income trading
In the first quarter of 2013, UBS achieved a massive 50% return on attributed equity in its investment bank. It generated 20% more revenues than during the first quarter of 2012, using around 10% less balance sheet and with around 15% fewer people in the front office. The cost income ratio in UBS’s investment bank was 65%, down from 78% last year and was one of the best in the industry.
All of this follows UBS’s decision last October to slash 10,000 jobs in three years and to pull back significantly from fixed income sales and trading.
2. UBS still has a lot of job cuts to go
UBS is cutting 10,000 jobs and its expects its total headcount to be 54,000 by 2015. At the end of the first quarter, headcount at UBS was 61,782, so that’s another 7,782 job cuts to go.
Many of the redundancies are expected to hit the investment bank. 1,051 jobs were cut in the investment bank during the first quarter.
3. UBS has been re-allocating staff
UBS isn’t just cutting staff, it’s also shifting them between business areas. 400 people were reallocated into wealth management. 650 people were reallocated out of the investment bank.
4. UBS’s fixed income revenues are less than half what they used to be, its equities revenues are up. IBD doesn’t look great
Having pulled back from fixed income, revenues in UBS’s fixed income sales and trading business have fallen nearly 60%, to CHF619m. This doesn’t appear to have impacted the bank’s equities sales and trading business, however – revenues there are up 17% year-on-year in the first quarter.
Andrea Orcel’s M&A bankers aren’t doing so well. M&A revenues at UBS fell 33% in the first quarter (at Goldman Sachs they were down 1%, although at Deutsche they were down 43%). However, equity capital markets revenues at UBS rose an impressive 152% over the same period.
5. UBS appears to be paying its investment bankers more
In the first quarter, pay per head at UBS’s investment bank was CHF101k. This was up from the CHF91k per head paid by UBS last year and was considerably more than the CHF76k per head that was on offer at Credit Suisse in the first quarter.
Some of this money may be due to severance payments, however.
6. Deutsche Bank has finished the redundancies it announced in its investment bank, but only just begun cost cutting
Last July, Deutsche Bank said it was making 1,500 redundancies in its corporate and investment bank. Today, the bank said these are ‘materially complete.’
Nonetheless, Deutsche still has a lot more cost cutting to go. Slide 10 of the bank’s results presentation reveals that only €600m of costs have been taken out of the investment bank, compared to a target of €4.5bn by the end of 2014.
7. Deutsche Bank is paying its investment bankers exactly the same as before
In the first quarter of 2013, Deutsche paid the average person its corporate and investment bank €63k. In the first quarter of 2012, Deutsche paid the average person in its corporate and investment bank €63k. In other words, pay is completely static.
8. Deutsche has been cutting its front office investment bankers more vigorously than the rest, but this may be coming to an end
Deutsche employs 27,592 people in its corporate and investment bank, of whom 8,792 work in the front office. Over the past twelve months, front office headcount was cut by 12% while total headcount across the corporate and investment bank was cut by 6.5%, suggesting front office bankers were being disproportionately eradicated.
Redundancies became more evenly focused in the past quarter, however: 2.8% of the front office bankers were cut at Deutsche Bank, compared to 2% of all employees.
9. Deutsche confirmed that it has been a bad time to work in rates trading, especially in Europe
Fixed income sales and trading revenues at Deutsche Bank were static between the first quarter of 2012 and the first quarter of 2013. However, Deutsche said it had been a bad quarter for rates trading, particularly in European rates as ‘as macroeconomic uncertainty impacted client activity.’ Other banks have said much the same thing.
10. The best place to work at Deutsche Bank in the last quarter was probably Asian equity derivatives
Deutsche Bank had a good quarter in equities, with revenues up 25% quarter-on-quarter. Best of all was equity derivatives, where Deutsche said it achieved ‘significantly higher revenues y-o-y driven by strong performance in Europe and especially in Asia.’