Wall Street traders post triple gains of European rivals
Europe’s biggest investment banks missed out on gains from commodities in quarter marked by oil swings
Europe’s largest investment banks captured barely a third of the trading gains posted by Wall Street rivals in the first quarter amid wild market swings, with continental lenders held back by their limited presence in commodities trading and a weaker dollar.
UBS, Deutsche Bank, BNP Paribas, Société Générale and Barclays reported growth of 6 per cent in equities and fixed income, currencies and commodities (FICC) trading during the quarter. Together, the banks posted €13.5bn of trading revenues.
Their performance significantly lagged behind Wall Street’s largest lenders — JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citigroup and Bank of America — which booked a collective $43bn in trading revenues, a 17 per cent jump on the previous year, according to data from Keefe, Bruyette & Woods.
The meagre trading gains delivered by European lenders came despite the conflict in the Middle East and concerns about AI disruption triggering significant market volatility during the first three months of the year — conditions that typically boost banks’ trading desks.
They missed out on the market swings because of some European banks’ decisions to exit their commodities businesses after the financial crisis sparked tighter regulations. A stronger euro also eroded revenues earned in US dollars for European lenders during the quarter.
“European investment banks fell short largely due to the weaker dollar and their lack of commodities exposure relative to US banks,” said Thomas Hallett, an analyst at KBW.
He added that US banking deregulation may also have played a role because US banks’ “capacity to compete just went up yet another notch”.
European banks trail US peers in trading revenues. Since Donald Trump returned to the White House last year, US regulators have eased some bank capital rules and rolled back parts of the post-financial crisis regulatory framework, boosting US lenders’ competitive advantage over more tightly constrained European peers.
France’s SocGen was the worst-performing European bank in trading terms, with revenues at the unit falling 4 per cent on the same period a year earlier, weighed down by an 18 per cent slump in FICC revenues.
SocGen’s chief executive Slawomir Krupa said the poor performance reflected the unit’s “business mix”, which has a fixed-income division that is tailored more towards rates trading. It said its European rates business faced “challenging commercial and market conditions”.
Andrew Coombs, an analyst at Citi, said: “It would appear SocGen is losing market share even in its home region and it raises questions whether the current business mix is the correct one, as it does not play to where the structural growth opportunities currently reside.”
Deutsche Bank — which no longer has an equities or commodities trading business — and Barclays both posted broadly flat revenues in their fixed income divisions.
UBS, whose markets business is geared towards equities rather than fixed income, was the standout performer during the quarter. The Swiss lender delivered a 31 per cent rise in total trading revenues — the biggest gain of any large investment bank in Europe or the US during the period and a record quarter for UBS.
However, the relatively weak performance of European banks’ trading desks underscores how the sector is continuing to lose ground to bigger US rivals, which benefit from greater scale and are less constrained in deploying risk.
While European policymakers have long been calling for more consolidation across the EU’s fragmented banking market — which retrenched in the wake of the 2008 financial crisis — executives say the sector has been plagued by regulatory hurdles and political resistance.