CIB Review 2Q23/6m23

Capital Markets

UBS postponed the release of its 2Q23 results to 31-Aug-23; the financials shown here are Tricumen estimates. Credit Suisse is excluded from all analysis.

The aggregated operating revenue of the banks in this note topped $105bn in 6m23, down 8% y/y. Despite some signs of recovery in DCM bonds and ECM, Banking weakened; as did FICC Macro and Equities. AMER banks held up better than their EMEA peers: -5% vs -13% y/y. Operating costs also declined, but at a slower rate, leading to the 12% y/y drop in pre-tax profits.

Several banks made big announcements on regional staffing levels. Driven by post-Brexit considerations – largely unaffected by the UK/EU MoU signed in June – banks will (continue to) selectively hire in Eurozone. In APAC, most banks are reducing their exposures to Mainland China.

In late July, the three big US regulators jointly proposed ‘Basel 3 endgame’ capital requirements for all banking institutions with more than $100bn of assets (down from $250bn), which will now need to apply supplementary leveraged ratio and countercyclical capital buffers; and also use standardised method to measure risk, rather than internal models. The new measures, FDIC estimates, would increase Common Equity Tier 1 by 16% for in-scope banks.

Commercial Banking & Treasury Services

High interest rates and deposit margins were the key – and for many banks in this report, the sole – driver of revenue. Several banks have seen a record decline in loan volumes – attributable to interest rates hikes – and/or a surge in provisions. Trade finance weakened vs 2Q22.

The (expected) credit crunch in corporate lending is attracting more non-bank actors: reportedly, SoftBank may join Apollo, Blackstone and others in extending loans to companies that are having difficulties in raising loans from ‘traditional’ banks. Such initiatives may not be overly welcome in Eurozone: ECB’s latest study, released in June (an update of previous such studies), pointed out that traditional banks source a significant proportion of their liabilities from ‘shadow banks’ and that instability in one sector could therefore spill over to the other.

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