UBS Foreign Exchange and Fixed Income Revenues Tank by Over a Third YoY

The investment banking division of the Swiss giant posted a decline of 37 percent in trading.

Swiss bank UBS joined the party of declining trading revenues amongst major banks. The company reported a 37 percent revenue decline in its foreign exchange and fixed income and credit division. The desk netted CHF 294 million ($294.1 million), a figure which is also lower by 21 percent when compared to the second quarter of 2017.

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Overall the investment bank posted an increase in profits by CHF 108 million ($108 million). The number is 67 percent higher, marking CHF 269 million ($269.1 million). Higher revenues from derivatives, equity, and debt capital markets have largely offset the decline in FX and fixed income.

The company’s investment banking unit reports that its operating income was broadly unchanged at CHF 1.8 billion ($1.8 billion). In US dollar terms the figure actually increased by 1 percent.

Low Volatility Dissipating

The low volatility environment that dominated the previous quarter seems to be slowly dissipating. Yesterday the European Central Bank triggered the largest daily drop in the value of the euro for the year as President Mario Draghi surprised the market with a dovish tone during his press conference.

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A broad-based dollar rally in the anticipation of a change in the Federal Reserve’s leadership is also helping FX volatility.

Equities Derivatives Picking Up

Client hedging activity appears to have picked up materially during the period. UBS reports that revenues from its derivatives division increased by a bit over a third to CHF 208 million ($208 million).

Overall the division saw a flat performance at CHF 784 million ($784 million) in revenues. The number decreased by 2 percent year-on-year and by 16 percent when compared to the previous quarter.

Total Risk Stable

The total risk exposure of the UBS investment banking division remained stable at CHF 76 billion ($ 76 billion). The figure is below the company’s own short to medium term expectation of CHF 85 billion.

The unit also managed to decrease its operating expenses in the period, marking a cut of 6 percent annually to CHF 1.53 billion ($1.53 billion). Personnel compensation expenses declined 10 percent to CHF 709 million ($709 million). The decline is a result of a drop in salary expenses.

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