If you work for UBS now, you don’t want to be a contractor, or in equity capital markets. You do want to be in the U.S., probably.
These are the implications of the Swiss bank’s second quarter results, released today. As the chart below shows, UBS had a miserable second quarter in equity capital markets (ECM) compared to rivals and a weak three months in debt capital markets (DCM) and M&A too. Fixed income trading (FIC) at the Swiss bank was very strong, but it’s in the Americas where UBS is really pushing for growth this year.
“We are focusing our hiring on the U.S. to rebalance our portfolio,” said UBS chief executive Sergio Ermotti during the call accompanying today’s results, speaking in response to a question on the bank’s poorly performing corporate finance business. “We are an APAC-Europe skewed investment bank and a little bit of diversification will help… We are not talking about [hiring] hundreds of people, but people who will help rebalance the portfolio.”
Ermotti’s comments come after the head of UBS’s investment bank Andrea Orcel said in April that UBS has a, “very aggressive plan” for the U.S. which will involve doubling the number of client-facing bankers in the American market. UBS wants to hire, “old-fashioned bankers, who have relationships, have ideas, execute better than others — and clients therefore trust them,” said Orcel, adding that, “We have a very high bar on the quality of people we hire.”
Of late these quality people seem to be coming from Deutsche Bank. UBS hired Jeff Rose from Deutsche Bank to co-head Americas M&A in June 2018. Solon Kentas, also formerly of Deutsche Bank, joined UBS as an MD in consumer and retail M&A in the same month.
(Hover over the chart to highlight each bank’s results)
Ermotti said today that U.S. bank has also been building out its U.S. equities business and that this performed well in the second quarter, with growth in both flow and structured products. Europe sounds like a headache by comparison: Brexit will cost CHF100m ($101m) this year alone, said Ermotti, describing the “threatening” language being used in Brexit negotiations as “quite disturbing.”
While the U.S. is UBS’s hiring sweet spot, you probably don’t want to be a contractor at the Swiss bank.
In the 12 months to June 2018, UBS cut 3,855 contractors as it focused on internal staff instead. However, it would be wrong to presume that internal staff are safe, even in the U.S or businesses that are performing well. UBS wants to cut another CHF100m from costs before the year end, and has been quietly laying off staff (the investment bank had 90 fewer staff in June 2018 than in March). Despite a strong year in fixed income trading thanks to its strength in FX, the Swiss bank has been cutting its rates sales desk. Recent layoffs include David Steckl, the former institutional head of U.S. rates sales who only joined from Deutsche Bank in mid-2017.
(Hover over the chart to highlight each bank’s results)
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