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UBS bankers outperformed, but there are still $8bn of expenses to cut

Bankers at UBS had a good first quarter, and UBS knows it. In announcing the 52% year-on-year increase in its banking revenues today, UBS noted that the overall global fee pool increased by only 18%. In announcing the 11% increase in its M&A advisory revenues, it noted that M&A fee pool fell 10%.

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As the chart below shows, UBS does indeed seem to have outperformed the market in M&A, where Barclays suffered a 30% revenue fall in the first quarter. However, UBS's M&A bankers didn't outperform rivals at Deutsche Bank and Goldman Sachs. The performance of UBS's equity and debt capital markets bankers (ECM and DCM) is not broken out.

Even as UBS's bankers had a strong quarter, however, its salespeople and traders seem to have floundered: fixed income sales and trading revenues at UBS fell 21%, compared to an increase of 7% at Deutsche Bank. Equities revenues were up 3% compared to an increase of 25% at Barclays.

UBS attributed its feeble markets performance to lower revenues in rates sales and trading. Barclays experienced something similar, even while Goldman Sachs made $100m of revenues a day nearly 40% of the time in Q1.

The comparatively poor performance of UBS's markets business may make it a target for further cost-cutting as UBS proceeds with the Credit Suisse integration. The bank said today that it cut $1bn from costs across the bank in the first quarter, that it intends to cut another $1.5bn in costs before the end of the year. Between Q2 '24 and 2026 it intends to cut a further $8bn in total. 

Some of these cuts will come from the non-core unit, which houses the unwanted elements of Credit Suisse's investment bank and where operating costs were 50% of those in the investment bank in Q1. The non-core unit made a $46m loss during the quarter. 

As UBS proceeds with the integration of Credit Suisse in the next three to five years, it's warning in its cautionary statements that the process "presents significant risks, including the risks that UBS Group AG may be unable to achieve the cost reductions and other benefits contemplated by the transaction."

The integration itself is costly: UBS spent $555m on "awards granted to employees to support retention and operational stability and severance expenses," in Q1. It expects to spend a further $3.5bn on all integration expenses this year. 

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AUTHORSarah Butcher Global Editor

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