As securities trading and research take a higher profile within its recovering investment bank, UBS formed a securities research unit that melds equity and fixed-income coverage under the leadership of Mark Steinert, its former global equity research chief.
It's the Swiss institution's latest step toward nurturing trading profits, the main growth engine lately for both UBS and its main European and U.S.-based rivals.
The bank plans to hire hundreds more sales and distribution professionals in coming quarters, primarily in fixed income, CFO John Cryan told Bloomberg TV Tuesday. That follows the addition of more than 350 FICC staff in the past 12 months. Cryan said UBS aims to hire "selectively" in corporate finance as well.
Less Favorable For Operations and IT Staff
Operations staff, on the other hand, are less likely to see the combined research unit as a positive step. An internal memo cited by Financial News promises cost savings "by rationalising spending on business management, operations and technology."
The effort promises to bring more "holistic" analysis for clients, says the memo from four UBS executives: Neal Shear, global head of securities; Jeff Mayer, executive chairman of the fixed income, currencies and commodities (FICC) trading business; and Rajeev Misra and Dimitri Psyllidis, co-heads of FICC.
Placing equity and fixed-income analysis under one roof emerged as a trend on Wall Street several years ago and UBS was in the forefront, says Richard Lipstein, managing director at Boyden Global Executive Search. The approach has proven effective for research groups as a whole, albeit unwieldy for every individual analyst to follow the full range of equity and debt securities of companies in their coverage list. "From a management standpoint it's do-able," Lipstein tells eFinancialCareers News. "It forces people to work more closely together rather than having them as part of different departments."
Credit Trading Drove First-Quarter Gains
UBS Securities Research is part of the four-month-old securities division, formed when Shear and distribution chief Roberto Hoornweg came aboard early this year. That division's first-quarter revenue of 3.4 billion Swiss francs ($3.23 billion at the March 31 exchange rage) dwarfed 683 million Swiss francs in combined capital markets plus advisory revenue and allowed the investment bank to swing to a profit from a loss a year earlier.
Like most other global investment banks in this year's first quarter, UBS reported near-flat revenue from merger advisory and securities underwriting, and strength in securities trading - credit trading in particular. The bank told shareholders it expects trading business to sustain that performance in the current, second quarter.
The compensation ratio in the investment bank rose to 53 percent last quarter from 47 percent in 2009.