Forget UBS and Barclays. Europe's finest traders are quietly killing it

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Should you do lots of things 'ok', or one thing very, very well? It's a question that UBS and Barclays might ask themselves in light of today's first quarter results.

Both banks had a superb quarter in investment banking. As the chart below shows, combined revenues across M&A, equity capital markets and debt capital markets in the quarter were up 51% year-on-year at both banks - more than at all rivals, U.S. banks or not.

In fixed income sales and trading, however, Barclays and UBS lagged the rest. This was perhaps inevitable: both banks lack the exposure to U.S. credit markets and securitization revenues that helped drive revenues at J.P. Morgan, Bank of America and Credit Suisse (whose historical strength in securitization was helpful in the past three months).

UBS's six per cent drop in fixed income sales and trading revenues is excusable given the bank's lack of focus on fixed income nowadays. Barclays' one per cent drop is more worrisome: for a place that prides itself on being a, "high performing transatlantic consumer and investment bank," in the words of CEO Jes Staley, it looks a little middle of the road. Barclays' macro trading engine appears to have misfired fairly dramatically in the past quarter. The bank's fixed income traders "didn't do quite as well as I would have liked it," said Staley during this morning's call, adding that U.S. rates trading was particularly disappointing. Little mention was made of Barclays' equally miserable performance in equities, except to say that new investment bank CEO and equities maestro Tim Crosby is busy implementing a strategy that should improve things soon.

If UBS and Barclays' traders struggled in the first quarter, which Europeans did well? Try the rates traders over at the newly resurrected NatWest Markets business, formerly known as the investment bank at RBS.

Here, as the chart below shows, fixed income revenues were up 75% year-on-year, far more than any other European banks - and nearly as much as the enigma that is Morgan Stanley's irrepressible fixed income trading business.

NatWest Markets doesn't do equities trading and it doesn't do broader investment banking. It just does fixed income, and within that it mostly just does macro (rates and FX). Like other banks, its FX revenues declined slightly in the first quarter, but this was more than compensated for a 170% increase in rates revenues. If you're looking for the most impressive traders in Europe in Q1, they therefore appear to be here.

Of course, revenue growth isn't everything. The return on equity at NatWest Markets in the first quarter was a miserable 1.7%. However, with £453m of macro revenues in Q1, RBS's trading business is a force to be reckoned with. Not all banks break out their macro businesses, but among those that do RBS was by far the best - as evinced by the second chart below. Sometimes it makes sense to work for a bank that's excellent at one thing, instead of so-so at them all.



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