UBS Fixed-Income Revenue Said to Reach $2.3 Billion
UBS AG generated about $2.3 billion of revenue at its fixed-income division in the first quarter as Switzerland’s biggest bank rebuilt the unit following record losses, people with knowledge of the situation said.
UBS may have revenue of almost $1 billion from credit alone, said the people, who declined to be identified because the figures haven’t been publicly released. UBS hired about 350 people at its fixed-income unit, which includes emerging markets and foreign exchange, in the past 12 months.
The performance would mark a reversal of fortune for the bank’s debt unit, which was responsible for most of the $57.5 billion in writedowns and losses during the credit crisis. Zurich-based UBS had a loss of 1.97 billion Swiss francs ($1.85 billion) from fixed-income sales and trading in the first quarter of 2009, the company reported.
“The relative progress for UBS’s fixed-income has to be good because they barely made any revenue in 2009,” said Dirk Hoffmann-Becking, an analyst at Sanford C. Bernstein in London. “Whether you get back to a top five position in fixed income, which is where the profit is, is another issue.”
UBS rose two centimes to 16.6 francs in Zurich trading.
Goldman Sachs Group Inc.’s fixed-income, currencies and commodities unit will probably report revenue of $6.8 billion for the first quarter, up from $4 billion in the fourth quarter and $6.6 billion in the first quarter of 2009, according to a note from Richard Staite, an analyst at Atlantic Equities. He rates New York-based Goldman Sachs “overweight.”
Banks are profiting from trading and selling debt as credit markets recover to levels not seen since 2007.
UBS’s hires so far this year include Thomas Siegmund, formerly of Nomura Holdings Inc., and Shahryar Mahbub, previously at New York-based Citigroup Inc., to co-head fixed- income Asia, people close to the bank said. UBS also hired Edward Hubner and two other credit traders from Deutsche Bank AG in New York, according to the people.
The fixed-income unit is composed of three businesses: credit, emerging markets and “macro,” including foreign exchange, money market and interest-rate sales and trading.
UBS spokesman Dominik von Arx said he couldn’t comment.
A turnaround at the debt unit will be “central” to the bank’s goal of reaching an annual pretax profit of 15 billion francs in three to five years, UBS said in November.
Carsten Kengeter, 42, gave up his role as co-head of fixed income in January to focus on his position as co-chief of UBS’s investment bank. Alexander Wilmot-Sitwell, 49, co-leads the investment bank with Kengeter.
UBS aims to generate about 40 percent of the investment bank’s total revenue from fixed income in three to five years, or at least 8 billion francs annually. That would return fixed- income revenue to the levels achieved before the credit crisis led to record losses at the bank.
A recovery at the investment bank, which includes equities and investment banking as well as fixed income, helped the bank report its first profit in more than a year last month. The bank said on Feb. 9 net income was 1.21 billion francs in the fourth quarter, compared with a loss of 9.56 billion francs in the year-earlier period.
UBS aims to reach an annual pretax profit of 6 billion francs at the investment bank over the next three to five years, after losses since 2007.