Without the support of investors, it will be difficult for them to invest in technology, which is increasingly necessary
The traders of European banks had very little to celebrate in the 1910s. Its rivals in the US ate up a growing market share in equities, and in fixed income, currencies and commodities (FICC). But first quarter results show signs of recovery.
BNP, Deutsche Bank, Barclays, Société Générale, HSBC, UBS and Credit Suisse posted a global increase of 17% year-on-year in revenue from trading variable income, and 6% in FICC. JP Morgan, Goldman Sachs, Morgan Stanley, Citigroup and Bank of America were roughly flat overall.
Those in the US continue to have 66% of the pie in both regions, compared to 34% in Europe. But the 2019-21 averages were 67% and 33%: Europeans have gained 1.1% of the market. Deutsche, BNP and Barclays stand out. BNP has added cash shares and prime brokerage to its historically patchy product set, while Barclays has filled in the holes of the Lehman Brothers businesses it inherited. Deutsche has finally shed the basket case image that could dissuade counterparties, and has revamped its technology.
It will be difficult to keep up. FICC’s European businesses benefited disproportionately from companies that tried to cover their liabilities after the invasion of Ukraine. The trading credit, a business in which the US has an advantage, has been unusually weak. That will be reversed. And those in the US have suffered an IPO drought. His return will give them momentum.
Finally, the European champions of the trading They lack the support of their shareholders. They suffer a discount in the valuation for the risks. Barclays, Deutsche and BNP trade on average at about a 60% discount to Stoxx Europe 600 Banks, using price-to-book ratios. Shareholder skepticism makes it harder for management teams to justify new investments, a worrying trend as technology and automation become more important. Recovery can be a blink.
