The decision to scale back on fixed income was a relatively easy one for UBS - the firm is thought to have only less than a 4% share of the market in fixed income, currencies and commodities (compared to 11.2% at JPMorgan, 9.9% at Citi and 9% at Barclays), and has a strong equities and wealth business to fall back on.
The Financial Times quotes Deutsche Bank analyst Matt Spick, who said in a recent note: 'Too many banks (are) still pursuing businesses in which they are subscale'. And UBS has now joined Royal Bank of Scotland and Nomura in making decisions that will allow these firms to play to their strengths (in the case of RBS and Nomura, it was cash equities which proved to be the weakest link).
According to the FT, the UBS move 'raises questions over the strategy of banks such as Morgan Stanley and Credit Suisse, which had a 4.4% and 5.1% FICC market share respectively in the first six months'.
James Chappell, an analyst at Berenberg Bank, said in a note earlier this year that: 'We would like to see Credit Suisse take a more decisive approach to closing businesses in FICC'. And Morgan Stanley CEO James Gorman has already made clear that his strategy is being built around having a strong wealth management business too. It may only be a matter of time before both these firms decide that it no longer makes sense to try to be all things to all men, and review their FICC operations.
Deutsche Bank, on the other hand, has a very strong fixed income business, but has been unable to get the same traction with equities. And some are now suggesting that it makes no sense to continue flogging a relatively dead horse.