Sector: Capital Markets: Results Review 2Q13 / 6m13

Capital Markets: Results Review 2Q13 / 6m13

The capital markets 6m13 revenue for Top 12 investment banks reached $104bn, 5% above 6m12; the 2Q13 revenue totalled $48bn, an impressive 22% up versus 2Q12.  Revenue grew in most major products, but this was partly offset by a sharp fall in FICC rates.  Prop and principal investment revenue also advanced 6m13/6m12; but we note that Credit Suisse and J.P.Morgan are set to sell their private equity units and prop is being ‘managed down’ across the peer group.

As expected, banks trimmed the headcount in 2Q13.  A surge in primary and equities revenue-per-headcount productivity seen in 6m13/6m12 period was largely due to revenue growth, rather than reductions in staffing levels; by contrast, productiity gain seen in FICC was in spite of a strong decline in rates revenue, which indicates the scale of headcount reductions to date.

Citi and HSBC increased their share of peer group revenue, driven by FICC.  UBS lost ground overall; excluding FICC, however, the bank outperformed, especially in primary.

In July-13, US regulators implemented a new framework that will provide no exemption to CVA charge for derivatives counterparty risk.  This, we expect, would give a competitive advantage to European banks pitching corporate derivatives.

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