By Alexandra Fletcher
Earnings from three major European banks Tuesday underlined the
tough conditions for dealers seeking to eke revenues from
currencies trading, even for firms that handle chunky flows.
Deutsche Bank AG (DB)--the world's number one currency dealing
bank according to the benchmark Euromoney survey--said in its third
quarter earnings announcement that this was its third consecutive
quarter with a record foreign exchange volume. But new highs in
foreign exchange volumes didn't translate into record revenues,
said Jurgen Fitschen and Anshu Jain, co-chairmen of the management
board in a conference call.
For units including currencies, total sales and trading revenue
at Deutsche Bank for the third quarter were reported at 2.5 billion
euros ($3.2 billion), a 67% increase compared with the same quarter
last year. But currency revenues were "significantly lower than the
prior year due to compressed margins," meaning overall trading
performance was boosted by a strong run in credit and rates, the
bank said.
That performance was echoed at the fourth-largest currency
dealing bank, UBS AG (UBS), which also reported earnings Tuesday,
as well as at U.S. banks Goldman Sachs Group Inc (GS), BNY Mellon
Corp. (BK) and State Street Corp. (STT) which all reported dreary
third-quarter earnings earlier this month.
At UBS, fixed income, currencies and commodities business
revenue was recorded at 1.16 billion Swiss francs ($1.23
billion)--roughly flat on the last quarter and up 8% on the same
quarter last year.
UBS' Chief Financial Officer Tom Naratil said in a conference
call that overall currency volumes were down due to subdued market
conditions. However, "Customer spot FX volumes have grown 50%
year-on-year due to improvements on e-trading", said Mr. Naratil.
At this stage, it is unclear how the bank's currencies business
will be affected by plans to axe 10,000 jobs, including mass
layoffs from the fixed-income business, which the bank also
outlined Tuesday.
While over at Standard Chartered Plc (STAN.LN), the 18th biggest
currency dealing bank, it said in a third-quarter trading statement
that profits in foreign exchange were down due to "volume reduction
and spread compression." Total revenues will be reported in the
full-year trading results next year.
Next to report third-quarter earnings is the third-biggest
currency dealing bank, Barclays Plc (BCS), which is due tomorrow.
Up next in November is seventh-place the Royal Bank of Scotland
Group Plc (RBS); fifth-place HSBC Holdings Plc (HBC); 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).
Write to Alexandra Fletcher at
alexandra.fletcher@dowjones.com
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