UBS just clocked up the same equity capital markets revenue as JPMorgan and Citi, and more than anyone else. That also means more than Goldman Sachs: for two quarters in succession. While the global fee pool in the third quarter actually fell by 1%, UBS’s quarterly ECM revenues, were up year on year by 132%.
So what’s going on? In the third quarter of 2017, UBS’s ECM bookrunner league table credit was about $7.8 billion, according to Dealogic data. That’s a 3.88% market share for 7th place – some way off JPM’s 8.6% leading position. Back in the same quarter of 2016 UBS’s share was… 3.45% for 7th place, some way off JPM’s 9% leading position. The bank’s league table position might not have changed, but it has clocked up more attributed credit, up from $7.1 billion. But that still doesn't explain it.
The answer is private ECM business, which doesn’t appear in league tables but shows up very nicely in the top and bottom lines.
UBS doesn’t talk a whole lot about it, but it’s certainly paying rich dividends right now. There may be partly a reporting difference at play here: bankers have long sniped that reported ECM revenues can be rather “noisy”, depending on how much non-public business a bank chooses to book there. In the first quarter of this year, the global fee pool for public ECM leapt 73%.
Sure enough, UBS was not leading the pack – it only made 65% of the ECM revenue of Morgan Stanley, for example, but its business mix places it in the driving seat when public markets go off the boil. That’s just as well, for two reasons. First off, the bank is being investigated by Hong Kong regulators for historic IPO sponsor business – an investigation that investment bank head Andrea Orcel expects to be expanded to others in the industry over time.
Against a backdrop like that, the risks make public business in a region where the bank has traditionally been so strong rather less appealing. Then there’s diversification. FICC revenues at UBS fell by 37%, or about $175 million – a little more than the entire increase in its ECM revenues. No one is expecting FICC to stage a big revival any time soon. A countercyclical ECM franchise could be handy for a while yet.