Bloomberg reports that UBS announced an unexpected pretax loss of $2.7bn for its investment banking arm yesterday and job cuts totaling 10,000 across its business. Deutsche Bank reported an eight-fold surge in its pretax profit from investment banking, and revenue from fixed income helped fuel a 29% increase in pre-tax profits over at Barclays.
'It’s positive for the banks that remain active as new business will be split among fewer players', Daniel Hupfer, who helps manage $46bn including Deutsche Bank shares at M.M. Warburg, said in a phone interview Tuesday. 'Investment banking and lending margins will rise if fewer banks offer those services'.
The world’s biggest investment banks, which also include JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C), are facing less competition for business after UBS became the latest of Europe’s banks to shrink its operations, saying it will reduce fixed-income trading. Royal Bank of Scotland Group Plc., which said in January it would close or sell unprofitable equity and mergers advisory divisions, was also among victims as Europe’s debt crisis roiled markets and tighter capital rules made some businesses unprofitable.
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