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UBS investment bank profit slides 30% after dealmaking slide

Despite high trading revenue, UBS’s investment bank recorded a 30% reduction in profit last year as dealmaking fees dropped by half.

UBS office

Last year, the Swiss bank earned approximately $1.6 billion in investment banking fees, a fall of 50% compared to the previous year, which was comparable to its Wall Street competitors. However, the $7.1 billion in revenue generated by its global markets division was up 13% from the previous year, with both equity and fixed-income segments seeing growth.

The profit of UBS’s investment bank decreased by 84% to $112 million in the fourth quarter of 2022 as the majority of business lines plummeted.

UBS’s net income of $7.6 billion for 2022 above expert estimates, as did the net income of $1.6 billion for the fourth quarter. It stated it would repurchase $5 billion in shares in 2023.

Ralph Hamers, the chief executive officer of UBS, stated in a statement, “Our dedication to serving our clients and the focused execution of our strategy led to positive outcomes this year.” We accomplished our group objectives and are confident in our capacity to do so in 2023.

After a record year in 2021, investment banks have struggled to make fees over the past year due to growing inflation, stagnant leveraged finance markets, and the conflict in Ukraine. UBS’s $854 million in fees from capital markets activities has decreased by 60% year-over-year, compared to the same period in the prior year.

Fees from mergers and acquisitions decreased 25% to $733 million, which was substantially in line with decreases on Wall Street.

In spite of this, costs grew by 3% to $1.6 billion in the fourth quarter of 2022 as variable compensation costs rose. Sarah Youngwood, the bank’s chief financial officer, said analysts that the US investment bank’s performance was lower than in 2021 and that the institution was “continue to invest in the franchise to strengthen our capabilities.”

All Wall Street banks have disclosed significant decreases in investment banking fees. Citigroup’s 53% decline was the steepest of any major US bank, while Morgan Stanley, JPMorgan, and Goldman Sachs all saw fee declines of 49%, and Bank of America’s fees fell by 41%.

According to data provider Dealogic, UBS ranked 12th in the investment banking fee league tables in 2022, with a 1.6% share of the market. The previous year, it finished in tenth place.

UBS is one of the few investment banks that has not disclosed any layoffs, despite competitors’ reductions. Credit Suisse is in the midst of a cost-cutting initiative that will result in the elimination of 9,000 positions by 2025, while Goldman Sachs removed approximately 3,200 positions in January. Barclays, Citigroup, Deutsche Bank, and Morgan Stanley have each eliminated positions for dealmakers.

Hamers told Bloomberg at the annual gathering of the World Economic Forum in Davos that the company was still in “expansion mode,” while the Financial Times claimed that the company was seeking M&A dealmakers from boutique investment banks.

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