UBS, Deutsche Bank to Show If Europe Banks Matched Wall Street

Table of Contents Investment BankingBusy BankersFixed IncomeTrailing Debt TradersEquitiesEquities ReboundArchegosBad loansGreensill European lenders are about

European lenders are about to show investors if they can ride the pandemic-induced wave of investment banking revenue that propelled U.S. peers to a record quarter.

While Credit Suisse Group AG kicked off Europe’s bank earnings season on Thursday, its gains in trading and advising on deals were a sideshow given blow-ups related to Greensill Capital and Archegos Capital Management. This week, four of the biggest securities firms are up.

The focus will be on Deutsche Bank AG’s ongoing efforts to regain market share in debt trading, UBS Group AG’s performance in wealth management and Barclays Plc’s ability to bolster earnings by releasing reserves for bad loans.

Banks are relying on their deal-makers and traders to generate profits. While lockdowns have forced corporate and retail banking divisions to stash money for a wave of bad loans when taxpayer-funded support measures run out, some U.S. Banks and European peers have already started to release reserves because of a better-than-expected economic outlook

These are some of the hot topics for investors when UBS publishes first-quarter earnings on Tuesday followed by Deutsche Bank the next day, BNP Paribas SA on Friday and Societe Generale SA the following week.

All the main U.K. lenders are also reporting results this week, including HSBC Holdings Plc on Tuesday and Barclays on Friday. Investors are on the lookout for additional guidance on HSBC’s increased investment in Asia and will scrutinize the performance of Barclays’ investment bank.

Investment Banking

Busy Bankers

Dealmakers at most of Europe’s top banks probably earned higher fees

Source: Company filings, analyst estimates compiled by Bloomberg

Bankers who help companies orchestrate takeovers and raise money on financial markets are set to outshine their colleagues on trading desks as clients rush to lock in lower funding costs. Still, that business is traditionally smaller than the markets operations and most European investment banks aren’t expected to track the doubling in revenue the top five U.S. firms saw in the first quarter.

Fixed Income

Trailing Debt Traders

Most European banks may fail to track debt-trading gains of U.S. firms

Source: Company filings, analyst estimates compiled by Bloomberg

Securities firms have warned that revenue from trading debt and currencies will probably fall this year after a bumper haul in 2020. Yet Deutsche Bank looks set to continue to profit in the first three months, allowing it to claw back market share after years of retrenchment. Again, the 10% gain that analysts are predicting at the German bank is less than the 17% increase at U.S. competitors.

Deutsche Bank said in mid-March that revenue at its wider investment bank to date was 20% higher than a year ago. It cited particular strength in credit trading. The German firm is Europe’s biggest bond trader, although it is still smaller than U.S. peers.


Equities Rebound

French investment banks were stung by losses in stock trading a year ago

Source: Company filings, analyst estimates compiled by Bloomberg

BNP Paribas and SocGen will probably see revenue from dealing in stocks rebound in the first quarter from a year ago when the suspension of many corporate dividends caused losses in equity derivatives, a specialty of French banks. SocGen could beat analysts’ expectations after Bloomberg reported that the business may generate a level of revenue close to the 667 million euros ($804.5 million) seen in the first quarter of 2019.

Yet, after overhauling those businesses, SocGen especially will face questions on where gains will come from in future. Other big stock traders in Europe, like UBS, will probably fail to keep up with the 36% jump that U.S. firms delivered in equities.


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