The chief executive of UBS has cooled estimates made by the bank’s chairman Axel Weber in January that it could shift 1,000 jobs out of London after Brexit.
On a third-quarter earnings call with reporters, Sergio Ermotti said that as the bank received more clarity from policymakers and regulators around the UK’s exit deal with the European Union, its worst-case Brexit scenario could soften.
No final decisions have been taken but, like its peers, UBS is in the process of planning how it will continue to serve its European clients once the UK officially exits the EU in March 2019. Ermotti reiterated that the bank had the necessary banking licences in place to operate from its offices in Frankfurt.
UBS has in recent weeks been canvassing staff in its investment bank about which EU city they would prefer to move to as a result of any Brexit-related relocations. Employees have been asked to rank Madrid, Frankfurt and Amsterdam by order of preference.
Andrea Orcel, the president of the investment bank, told a Financial News event last month that taking into account his staff’s preferences was an important step in keeping them happy amid the uncertainty of Brexit.
Profits at UBS’s investment bank rose by more than two-thirds in the last quarter — five years on from the start of an ambitious restructuring plan that put a focus on its core strengths in advisory and equities.
Reporting its earnings for the three months to September 30, UBS said non-adjusted, pre-tax profits at its investment bank rose by 67% year-on-year to 269m Swiss francs ($269m). Revenues of CHF1.8bn were flat but lower costs helped boost the division’s bottom line.
Fees earned from corporate client solutions — which includes mergers and acquisitions advice and capital markets work — rose by 35% to CHF720m, thanks largely to a 132% surge in revenues from equity underwriting.
But the bank, like its peers elsewhere in Europe and on Wall Street, was unable to escape big falls in its sales and trading business, where revenues dropped 15% year-on-year to just over CHF1bn. Revenues from foreign exchange, rates and credit were down 37%, with a more modest 2% dip in equities.
UBS’s group revenues of CHF7bn nudged up from a year ago, while non-adjusted profits of CHF946m were 14% ahead.
In the last five years, the bank has shrunk its balance sheet by almost a third and shed around 5,600 jobs in its bid to rebuild itself as a wealth manager first and foremost. Much of the restructuring has taken place at its investment bank, which has been led by Orcel since 2012.
Following his arrival, the Italian dealmaker quickly began to take apart the division. He simplified the businesses and focused on its strongest points — equities trading and advisory banking — paring back its large fixed income, currencies, and commodities unit to just FX, rates and credit in the process.
The bank’s management also reined in traditional investment bankers’ ability to offer loans to clients in order to win deals. This forced them to rely instead on advisory skills and the investment bank became referred to by some as a large boutique.
Indeed, UBS’s performance in advisory and capital markets in the third quarter was in line with independent investment banks including Moelis & Co and Evercore Partners, which both this week reported strong earnings for the period.
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