European investment banks outperformed their U.S. peers in trading revenue growth in the first quarter as volatility from rising rates and the war between Russia and Ukraine rocked markets.
In a sample of 13 global investment banks, five based in Europe — BNP Paribas SA, Barclays PLC, Société Générale SA, UBS Group AG and Deutsche Bank AG — reported double-digit income growth in fixed-income, currency and commodities in the period from a year ago, according to S&P Global Market Intelligence data.
France-based Groupe BPCE and U.K.-based HSBC Holdings PLC reported declines of 2.75% and 5.19%, respectively. In the U.S., four of the five banks in the sample also reported declines, Goldman Sachs Group Inc. being the exception.
For equities, six of the seven European banks sampled reported growth, with five of them recording double-digit increases. Two U.S. banks — Morgan Stanley and Bank of America Corp. — reported increases, while Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs reported declines.
BNP Paribas booked the highest year-over-year growth in FICC revenues with a 47.93% increase. UBS was the top riser in equities at 85.33%.
Embattled Credit Suisse Group AG posted losses in both business lines as it continues a restructuring that follows a series of scandals over the past year. Germany's Deutsche Bank was not included in the equities sample as it exited that business in 2019.
Volatility drives activity
The outperformance of European banks' capital markets revenues can in part be explained by the tough year-over-year comparisons for their U.S. counterparts, DBRS Morningstar said in a May 11 note. Some European banks were also rebounding from large losses in the first quarter of 2021 due to their exposure to collapsed U.S. family office Archegos Capital, Maria Rivas, senior vice president of global financial institutions at the agency, told Market Intelligence via email.
Foreign-exchange trading was boosted by volatile markets driven by central bank rate hikes, rising commodity prices and the impact of the Russia-Ukraine war, according to the quarterly investment banking review of research and analysis company Tricumen. Derivatives and financing revenues rallied, particularly structured products and annuity-type financing, Tricumen said.
Banks that are focused on areas such as rates and foreign exchange — including many of the European institutions — are likely to fare better in the year ahead than those more involved in areas such as M&A and equities, Coalition Greenwich said in its latest investment banking revenues report.
