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Barclays, BNP Show Boost for Equity Traders Who Dodged Archegos

This content was published on April 30, 2021 - 13:36

(Bloomberg) -- Booming stock markets and retail-investor fueled volatility have delivered the best quarter in years for many European banks’ equity trading desks, mirroring gains at their U.S. counterparts.

On Friday, Barclays Plc said the first quarter was the “best ever” for its equities unit, which reported a 65% year-on-year jump in revenue to more than $900 million, while BNP Paribas SA posted its highest earnings from equities since 2018.

With stock markets on a tear, a raft of European companies rushed to sell shares to keep up with Wall Street’s SPAC-listing boom. For banks it meant bumper fees, and BNP Paribas said the volumes handled by its equity capital markets team were three times what it saw in the same quarter a year ago. And while both Barclays and BNP were spared any fallout from the implosion of the U.S. hedge fund Archegos Capital Management LP, that incident wrecked what would otherwise have been banner quarters for the biggest Swiss banks.

“The European investment banks smashed it,” said Jerome Legras, head of research at Axiom Alternative Investments, which invests in financial firms’ securities. “And equities were the contributor this quarter. Even the ones with Archegos exposure, their results excluding that were impressive.”

Earlier this month, Europe’s largest bank, HSBC Holdings Plc said it benefited from the markets boom, reporting a 55% increase in first-quarter adjusted revenues from its equities business, reflecting what the lender said was “robust” client activity.

Even Swiss banking giants Credit Suisse Group AG and UBS Group got a boost from their equities teams despite taking hundreds of millions of dollars in charges related to the forced unwinding of bets by Bill Hwang’s Archegos in one of the biggest margin calls of all time. Both banks said higher revenues from equity derivatives and cash equities partially offset their Archegos-related losses.

The European equities bonanza matched gains recorded by U.S. banks. Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley all saw major gains in their businesses.

At Citigroup, equities-related fees were nearly five times what they were a year ago in the same quarter, while Morgan Stanley’s haul helped drive a 73% increase in investment banking revenues. U.S. banks’ equity-underwriting fees were almost quadruple their first-quarter 2020 level in aggregate, according to Bloomberg Intelligence, marking the third quarter in a row of growth more than doubling.

In the U.K. and the European Union, officials are looking at ways to boost local equity markets as bankers point to the success of their U.S. rivals. British officials are examining a range of proposals aimed at attracting more business to London, including loosening some of the U.K.’s listing rules.

“Regulators have clearly shown that they would like economic growth, financed by the capital markets as opposed to bank balance sheets,” said Jes Staley, chief executive officer of Barclays. “We’re going to participate in that.”

©2021 Bloomberg L.P.

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