UBS and CSFB to grow prime brokerage

"UBS aims to become one of the top three global providers of such services," the bank said in its financial report, released on February 10. "Through prime brokerage, UBS becomes a business partner to the emerging entrepreneurs of the hedge fund world. Some of today’s hedge fund start-ups will develop into multi-billion dollar global asset management businesses, and will rank among UBS’s largest clients in years to come."

The bank said "a clear signal" of these ambitions was the acquisition of Dutch bank ABN Amro’s US prime brokerage operation in late 2003, a move that had "reinforced our credibility in the US start-up hedge fund market, where ABN Amro was a clear market leader".

While this purchase largely brought the bank equities expertise, UBS is also co-ordinating its prime brokerage efforts across all sectors, including FX and fixed income, said Ed Hulina, global head of FX prime brokerage at UBS in London.

Credit Suisse, meanwhile, nominated prime brokerage and "related services" as a focus for its revenue growth alongside derivatives and European proprietary trading, in its report, out on February 12.

Both banks declined to comment on FX trading revenues earned in 2003, although UBS’s report noted "opportunities driven by rising market volumes" in foreign exchange.

The FX numbers published in the annual report -- group-wide FX trading income of Sfr1.75 billion ($1.41 billion) in 2003, down from Sfr1.87 billion the previous year -- do not necessarily reflect the bank’s FX franchise business, which sits within the fixed income, rates and currencies group, said Hulina.

Fixed income, rates and currencies made Sfr7.6 billion in 2003, up 16% from Sfr6.56 billion the year before. Although Hulina said the FX proportion of this group was up "pretty decently" in dollar terms, he was unable to quantify these revenues last week.

Credit Suisse’s FX trading income will not be known until its annual report is out on March 31, but the preliminary results released last week showed Q4 operating income for Credit Suisse First Boston’s fixed-income division, which includes foreign exchange, was up 67% on the same quarter for the previous year, to $981 million.

UBS’s published FX figures place it in second place behind Citigroup as the highest earning bank in FX for 2003.

Citi’s FX trading-related revenue was $1.78 billion in 2003, down slightly from $1.79 billion in 2002.

The UK banks start reporting their annual results this week, with HSBC’s completing the picture on March 1.

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