UBS's new Barclays bankers are doing well, but there are still big costs to cut
When a swathe of US bankers left Barclays for UBS last year, it was partly because they'd been promised bonuses at Barclays that didn't come through. This seemingly won't happen at UBS.
Get Morning Coffee ☕ in your inbox. Sign up here.
Even though it's less than halfway through its plan to cut $13bn of costs from across the bank by 2026, costs at UBS's investment bank rose 12% in the second quarter. The bank attributed this to "higher variable compensation." Bonuses.
That variable compensation is likely to flow more freely to some UBS bankers and traders than others. Revenues in M&A, capital markets and fixed income and equities trading were all up by double-digit percentages, with combined M&A and capital markets revenues up 55% year-on-year in the second quarter.
Speaking to analysts, UBS CFO Todd Tuckner credited UBS bankers in America and Asia with the increase in revenues. Two thirds of the growth came from the US, said Tuckner. APAC also did well; EMEA did not.
Most of the ex-Barclays bankers joined UBS in the Americas, where former Barclays star Marco Valla is now UBS's co-president of the investment bank, based in New York. Aalluding to Valla and all the other ex-Barclays people, Tuckner said UBS's investments to "deepen" its US presence are having a positive impact as all the new "US talent" makes a difference. UBS's US revenues have doubled, said Tuckner.
In the absence of its M&A stars, Barclays, meanwhile, has fared rather differently. Global M&A revenues at the British bank were up only 6% year-on-year in the second quarter, compared to the 23% increase at UBS. Barclays bankers continue to leave for the Swiss bank; TMT banker Alejandro Palacio moved across in July.
Even as UBS moves to reward its new Barclays bankers and the rest for growing revenues, there are pressures to keep costs at the Swiss bank down. Analysts questioned why costs in the investment bank had crept up to 84% of revenues in the second quarter, compared to 82% in Q1. Tuckner said "compensation-related effects were hitting through."
Dramatically higher UBS bonuses are not a done deal for the full year, however, particularly among limping bankers in Europe. CEO Sergio Ermotti acknowledged that recent volatility could be a problem: "If we see the kind of volatility of a couple of weeks ago, it will not be positive for the pipeline," he admitted.
Have a confidential story, tip, or comment you’d like to share? Contact: +44 7537 182250 (SMS, WhatsApp or voicemail). Telegram: @SarahButcher. Click here to fill in our anonymous form, or email editortips@efinancialcareers.com. Signal also available.
Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libelous (in which case it won’t.)
