A reminder that Credit Suisse's mighty fixed income trading business has been obliterated

When UBS reported its second quarter results today, one of the most notable things about them - apart from the success of its ex-Barclays bankers, was the shrivelled state of its fixed income sales and trading business. 

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Fixed income trading revenues at UBS rose 20% in the second quarter, which was more than at any rival bank, including Goldman Sachs (17%) and Morgan Stanley (16%). UBS credited the increase with higher revenues in both FX and credit trading. Rates options revenues rose; flow rates revenues did not.  

Despite this fine performance, Q2 fixed income revenues at UBS - which now includes the combined Credit Suisse and UBS trading operations -  were a mere $474m.  As the chart below shows, this is just 20% of what the combined Swiss banks generated during the boom of 2020.

Credit Suisse's once mighty fixed income sales and trading business has vanished. 

What happened? Some of its traders have been cut. Some have gone to Deutsche Bank. Some are at Atlas Partners. The rest are actually still there, but their efforts are not included in the investment bank's revenue line - they're now sitting in the non-core and legacy business. This is winding down Credit Suisse's positions and has made a loss of $451m year-to-date. 

As the chart below, taken from UBS's results today, shows, most of the positions in the non-core unit involve macro (FX and rates) and securitized products. These are being sold-on, slowly. Speaking today, UBS CFO Todd Tuckner said many Credit Suisse loans in particular were mispriced and uneconomic. 

The implication is that the might of the Credit Suisse trading business was just a mirage. 

Source: UBS

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