Some banks are quicker at adding up their revenues than others. The US banks invariably publish their results first , while the rest follow on in their own sweet time: Barclays and HSBC figures won’t be out until November 9 and 10 respectively. This week, though, we have the two big Swiss firms and the leader of the Euromoney FX survey for the last six years, Deutsche.
Credit Suisse summed up the quiet summer: “Most of our businesses were adversely impacted by a decline in client trading volumes that was exacerbated by a seasonal slow down. Results reflected a particularly weak July, a seasonally slow August and some improvement in September.”
Credit Suisse’s FICC numbers look solid enough: CHF1.458 billion ($1.475 billion) for Q3 compared with CHF1.438 billion for Q2. However, the results are way down on the excellent Q3 2009 number of CHF2.476 billion. There is no breakdown for performance in FX, except for the uninformative: “We had solid results in global rates and emerging markets.”
UBS FICC revenues suffered a near-50% decline over Q2 to CHF869 million from CHF1.703 billion. Again, unlike Credit Suisse, the result doesn’t look too bad compared with Q3 2009, when it reported revenue of CHF985 million.
UBS gives some indication of the impact of FX on the numbers. The bank says that within FICC, credit trading and structured products did well but this “was more than offset by weaker results in our FX and rates businesses due to reduced volumes”. Apparently the part of FICC that isn’t credit or emerging markets, UBS calls ‘macro’. This is probably not useful for comparison purposes because it poses the question of where emerging market FX would be recorded. For the record: “In macro, revenues were CHF291 million, compared with CHF664 million [in Q2]. The decrease mainly stemmed from lower earnings in the foreign exchange and rates businesses, which were affected by subdued market activity and tighter spreads.”
Finally, Deutsche reported its Q3 with the observation, as others did, that the “seasonal slowdown in client activity in July and August was exacerbated by ongoing sovereign risk concerns.” However, “this was followed by a strong rebound in September, particularly in the second half of the month.” But it looks as though FX escaped the summer doldrums at Deutsche; it “recorded strong results with higher revenues than in the prior year quarter as increased volumes offset the continued reduction in margins.” Figures for FX were not split out from the umbrella of ‘Sales and trading (debt and other instruments)’, which reported revenues of €2.200 billion for Q3 against €1.920 billion for Q2 and €2.088 billion for Q3 2009.
Of all the banks that have reported for Q3 so far, it seems that only Bank of America Merrill Lynch and Deutsche didn’t notice what a quiet summer it was in FX. Almost every bank has mentioned tighter spreads (or margin reduction, as Deutsche has it.) Looks like this could be a function of increased competition – post-crisis there is certainly a greater focus on core product, and FX is benefiting from some heavy investment this year. Last year’s Euromoney FX survey showed more concentration of market share at the top; it will be interesting to see if this has reversed at all as the players outside the top-five catch up in technology and penetration.
