Europe's Trading Desks Halt Long Slide as Credit Suisse Gains

(Bloomberg) -- Europe’s battered investment banks held their own in a quarter marked by challenging conditions, stopping a long slide in market share that has prompted painful adjustments across the continent.

Even with Deutsche Bank AG slashing its trading units and HSBC Holdings Plc being thrust into turmoil, European trading desks managed to eke out a small gain over their Wall Street peers in the second quarter. U.S. firms led by Goldman Sachs Group Inc. did better in trading equities and related securities, while Europeans led by Credit Suisse Group AG and BNP Paribas SA posted stronger income from buying and selling fixed-income instruments.

Here’s a look at how the biggest investment banks did in the second quarter, in four charts.

Europe's Trading Desks Halt Long Slide as Credit Suisse Gains

Deutsche Bank led declines in overall trading as the German lender pushed through its biggest overhaul in recent memory, but HSBC was a close second. The British lender on Monday ousted Chief Executive Officer John Flint after less than two years, surprising even some executives at the London firm. Among the U.S. banks, Morgan Stanley reported the steepest declines as hedge fund clients pulled back. All told, Europe’s trading desks saw revenue drop about 7%, compared with a roughly 8% decline on Wall Street.

Europe's Trading Desks Halt Long Slide as Credit Suisse Gains

Europe’s banks did relatively well in fixed income, currencies and commodities, known as FICC. BNP Paribas posted a 9% gain, leading a small group of European firms that bucked the broader downward trend. Banks such as Credit Suisse and Natixis SA cited strong performance in credit trading. Barclays Plc finance director Tushar Morzaria said he was optimistic on the basis of some “very large movements" across asset classes.

In the U.S., fixed-income traders struggled. Morgan Stanley led a broader slump, citing the “effects of a decline in interest rates and lower volatility.” The trend was echoed by larger rivals including JPMorgan Chase & Co. and Citigroup Inc. Top Wall Street executives embraced a sports cliche to describe cautious clients that led to their worst first-half for trading in a decade: “on the sidelines.”

Europe's Trading Desks Halt Long Slide as Credit Suisse Gains

Equities trading was one area where the U.S. stood out, with Goldman Sachs posting a 6% gain for the second-highest quarterly revenue from that business in four years. Only Credit Suisse managed to increase earnings from stock trading, despite a drop at its Asian unit.

Deutsche Bank posted the biggest decline here, after announcing during the quarter that it would largely exit the equities business, a dramatic overhaul it said was reflected in its results. Natixis reported a 19% drop, another blow for the French brokerage that lost almost $300 million on Korean derivatives late last year. Morgan Stanley, Wall Street’s biggest stock brokerage, Citigroup and BNP all cited a decline in hedge-fund activity while Bank of America Corp. blamed a “weaker performance” in equity derivatives in Europe.

Europe's Trading Desks Halt Long Slide as Credit Suisse Gains

Fees from advising clients on mergers and acquisitions or arranging their stock and bond sales didn’t offer much succor for global banks in the second quarter apart from UBS Group AG. The Zurich-based lender claimed “outperformance” as it advised on large global deals including the spinoff of contact lens maker Alcon Inc. from Novartis AG. By contrast, hometown rival Credit Suisse reported that “a number of transactions did not materialize in the quarter,” helping produce a 14% decline. Other rivals posted dips in revenue from managing debt sales.

©2019 Bloomberg L.P.

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