UBS makes big upgrades to investment banks
Analysts at UBS have made a significant upgrade to their outlook for investment banking revenues, forecasting that five of Europe’s biggest banks will make nearly $25bn (€18bn) more than they originally expected.
The five banks, Barclays, BNP Paribas, Credit Suisse, Deutsche Bank and Société Générale, will make a combined $111bn from their investment banking business this year, according to UBS, up from an original estimate of $86.4bn.
The analysts made the biggest upgrade to Barclays' investment banking earnings, which they estimate to make nearly $30bn this year, against an earlier forecast of $21.5bn.
Explaining the decision to increase earnings forecasts by nearly a third, UBS analysts said the markets were “wonderfully inventive” and pointed to the example of Credit Suisse which has made large amount of money trading distressed secondary mortgage ABS, offsetting the loss of its mortgage origination business.
The analyst wrote: “We now expect 2010 to look a lot like 2006 in aggregate for Credit Suisse and Deutsche – a striking outcome given much weaker economies, and testament to the power of free central bank money.”
Analysts at several banks, including JP Morgan and Morgan Stanley, have released bullish reports on the outlook for the investment banking industry in the last month, with many predicting a bumper year for firms.
In a report published two weeks ago, lead Morgan Stanley financials analysts Huw van Steenis wrote: “The second quarter and beyond is likely to be stronger than the market currently anticipates.”
Write to hwilson@efinancialnews.com
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