European banks finally start to feel benefit of rising rates
For the first time since the financial crisis, European bank bosses are beginning to enjoy the benefits of rising interest rates on their profit margins.
HSBC, UBS, Barclays, Deutsche Bank, Santander, UniCredit and Standard Chartered all reported better than expected third-quarter results this week, boosted by central bank interest rate raises — with more hikes on the way.
After more than a decade of lagging US rivals on profitability and share price performance, European banks are finally reaping the gains of rising rates.
The biggest drag for European investment banks in the third quarter, however, was their advisory arms, which have struggled to generate revenues along with their US rivals in a listless dealmaking market this year.
UBS, which is primarily a wealth manager, suffered a 19 per cent drop in investment banking revenues to $2bn, with revenues at the group’s global banking division, which includes its advisory and capital markets business, falling 58 per cent.
The slump in dealmaking is expected to lead to large job culls at Wall Street lenders, though European banks do not plan such severe cuts, according to executives.
The biggest outlier is Credit Suisse, however, which publishes third-quarter results on Thursday. It is expected to report a loss for the quarter, alongside details of a radical restructuring of the business.
The new strategic plan — its second in the space of a year — is expected to include the sale of several parts of the business, such as its profitable securitised products business, as well as up to 5,000 job cuts.
This story originally appeared on: Financial Times - Author:Owen Walker
