By Alexandra Fletcher
ZURICH--Credit Suisse Group AG (CS) kicked off the earnings
season for Europe's major foreign-exchange dealing banks Thursday,
showing upbeat revenues in its unit that encompasses currencies,
but European banks as a whole are still expected to mirror U.S.
banks' dreary performances in this business.
The Swiss bank--the eighth biggest currency dealing bank in the
world according to the benchmark Euromoney survey--reported fixed
income sales and trading revenues of 1.496 billion Swiss francs
($1.27 billion), up from 538 million Swiss francs ($576.4 million)
in the same period in 2011, and up from 1.19 billion Swiss francs
($1.27 billion) in the previous quarter.
Like most banks, Credit Suisse doesn't break out its revenues
specifically from FX, but it said in a statement the improvement
reflected "solid client flow and favorable trading conditions".
This forms a contrast to the big FX names in the U.S., most of
whose third-quarter trading revenues were depressed by lower market
volatility.
But Javier Paz, senior analyst at research firm Aite Group LLC,
based in Boston, thinks Credit Suisse's earnings were a blip. "The
earnings of European banks will invariably be impacted by the low
volatility FX environment through the end of August," he said.
This month sees third-quarter results from the world's biggest
currency dealer Deutsche Bank AG (DB), as well as fourth-placed UBS
AG (UBS), and third-placed Barclays PLC (BCS). Up next in November
is fifth-place HSBC Holdings PLC (HBC, HSBC.LN), 11th-place BNP
Paribas SA (BNP.FR), 13th-placed Societe Generale SA (SCGLY),
15th-placed Commerzbank AG (CRZBY) and 16th-placed Credit Agricole
SA (CRARY). But the picture mightn't be pretty.
Major exchange rates have been pinned into skinny ranges for
months because the world's biggest central banks, ranging from the
U.S. Federal Reserve to the European Central Bank, have introduced
unconventional monetary policies that have capped the way
currencies trade.
"Volatility is a driver of our profitability, and there really
is no volatility in the major currencies," said Thomas Gibbons,
chief financial officer of BNY Mellon Corp. (BK), in a conference
call this month.
BNY Mellon's FX revenue fell 23% in the third quarter from the
previous quarter to $121 million, down 45% on year. Also citing
lower market volatility was 10th-biggest FX bank Goldman Sachs
Group Inc (GS) and State Street Corp. (STT), the 17th biggest FX
bank.
This lower volatility has dented global currency-trading
volumes. ICAP PLC (IAPLY, IAP.LN) -owned EBS, one of the biggest
interdealer brokers, reported in September a 39% decline in volumes
year-on-year. And in their semi-annual survey of global currency
trading volumes in July, global central banks reported activity in
the biggest trading hubs declined by 5% to $3.65 trillion a day in
the year to April.
Anusha Shrivastava in New York contributed to this article
Write to Alexandra Fletcher at
alexandra.fletcher@dowjones.com
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