Bloomberg News

European Banks’ Securities Revenue May Fall 28%, Goldman Says

October 14, 2011

Oct. 14 (Bloomberg) -- European investment banks may post a decline of about 28 percent in revenue for the third quarter of this year mainly due to “weak market conditions,” Goldman Sachs Group Inc. said in a report.

Revenue from fixed income, currencies and commodities trading may have dropped 31 percent, while equities fell 30 percent, Goldman Sachs analysts including London-based Jernej Omahen said in a report to clients yesterday. Goldman Sachs also cut its 2011 earnings estimates for UBS AG, Credit Suisse Group AG and Deutsche Bank AG by 19 percent, 12 percent and 17 percent respectively.

“Squeezed by a tough revenue environment and regulatory change, European investment banks are struggling to deliver returns above their costs of equity,” the analysts said. “Capital markets have been weak in third quarter 2011, affecting investment banks in Europe and in the U.S.”

JPMorgan Chase & Co. said yesterday that revenue at its investment-banking unit slid 13 percent from the second quarter, as concern that Greece would default and U.S. lawmakers would fail to raise the debt-ceiling roiled markets. The firm said the division will face similar market conditions for the rest of the year. Deutsche Bank scrapped its profit forecast this month and announced 500 job cuts and further writedowns of Greek bond holdings amid a “significant and unabated slowdown in client activity” in the wake of Europe’s debt crisis.

Goldman Sachs said its preferred European investment bank is UBS as Switzerland’s largest bank moves to curb its investment banking activities. The firm has a “buy” rating on UBS.

--Editors: Jon Menon, Frank Connelly

To contact the reporter on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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