UBS falls behind after 82% drop in ECM revenues

By Owen Wild

LONDON, Nov 1 (IFR) – UBS (UBSN.VX: ) falls behind after 82%
drop in ECM revenues the drop in revenues from equity capital
markets in 2010 has been severe. ECM bankers always knew that
2010 was going to be a period of adjustment after the relative
plenty of the previous two years when they made fat fees
underwriting recapitalisations for corporates and financial

They had hoped that the IPO business would tide them through
a difficult period, but listing activity has been restrained and
ECM operations have suffered as a result.

Recent third-quarter numbers show that the collapse in
revenues has been pretty much across the board in Europe. In its
third-quarter results, Credit Suisse declared
that its equity underwriting revenues were down 16.8% for the
first nine months of the year, with the quarter-on-quarter drop
even starker at 51.9%. Deutsche Bank’s numbers were similar,
with a fall from equity underwriting of 28% in the first nine

But UBS was by far the worst hit of the major banks. Over
the first nine months of 2010, UBS earned SFr559m (US$567m) from
ECM, down a massive 53.6% on the same period of 2009. On a
quarter-on-quarter basis, the collapse was even more alarming.
Its revenues were just SFr90m – down 82% on the previous
quarter’s SFr500m.

Humiliatingly, those numbers mean that that UBS made less
from equity underwriting than rival Swiss firm CS in the nine
months to end-September. CS brought in SFr604m.
UBS missed out on some of the quarter’s biggest stock sales. It
was absent, for example, from the IPOs of Agricultural Bank of
China and Petrobras in Brazil and the follow-on offer from
Mizuho in Japan.

The one major deal it was involved in – the US$6.5bn sale of
China Mobile stock for Vodafone alongside Goldman Sachs and
Morgan Stanley – led only to a massive loss. Bankers involved in
the deal say that each of the trio lost some US$40m in that deal
alone when they bid too aggressively and got stuck with massive
amounts of stock.

“It was a large loss on a block and we shouldn’t have taken
it,” said one insider. “But one thing some people don’t realise
about ECM is that league tables are important, so you have to be

The China Mobile trade secured UBS second spot in
Asia-Pacific league tables.

In previous years, the bank faced little competition for
blocks in Asia and made a consistent profit. Now everyone is
chasing the same transactions and auctions are the norm.

UBS insiders are keen to point out that one reason for the
precipitous fall is the comparison with a remarkable 2009. That
year, UBS led the sale of