UBS Traders Trail Wall Street as Rally Shifts to Equities

A trading surge that lifted UBS Group AG’s profit last quarter still fell short of Wall Street’s performance, a sign that Europe’s investment banks may not have fully seized the equities-led rally.

Revenue from buying and selling stocks -- a traditional strength at the Swiss lender -- increased 28% to $1.07 billion in the fourth quarter. While that was higher than analysts had expected, it couldn’t quite match the 35% average gain for U.S. banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co. UBS’s fixed-income revenue gain was half that of its U.S. peers.

The results underscore the standout performance of Wall Street’s largest firms in equities, a business where Europe’s banks have struggled to keep up in recent years. Equities helped drive trading income in the fourth quarter, following an explosion in stock-market trading that could be seen in the popularity of apps such as Robinhood and the seemingly euphoric belief among investors that stock prices would only go up.

It had been a different story in the third quarter of 2020, when fixed income was the bright spot for most trading houses and a particular source of strength for UBS, which saw revenue soar 41% to $533 million. That put it ahead of most of Wall Street with the exception of Goldman Sachs.

In the final three months, the Swiss bank’s fixed income revenue was below consensus at $368 million, a 5% gain compared with the 10% increase across Wall Street. Its equities desk trailed all of the five biggest U.S. rivals, if narrowly.

While UBS’s gains didn’t live up to the surge that drove record quarterly profit at U.S. lenders, the Swiss bank posted profit gains in every division and met all its 2020 financial targets. The firm’s strong fourth-quarter results helped it boost stock buyback plans.

UBS’s overall investment banking revenue -- divided between the trading and advisory businesses -- came in ahead of estimates after rising demand for merger and acquisition advice helped drive a 32% increase in advisory revenues to $190 million. Capital markets revenue gained 34% to $478 million.

UBS is the first European bank with a significant investment banking business to report fourth-quarter earnings. The lender has pared back trading in recent years as part of a shift to wealth management, though it still has a relatively large equities unit.

©2021 Bloomberg L.P.

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