European investment banks are expected to reveal deep cost cuts amid declining trading revenues and concern over their exposure to the region??s debt-laden economies.
Employees at UBS are preparing for up to 5,000 job cuts across the group on Tuesday, when the Swiss bank, and Germany??s Deutsche Bank, kick off the quarterly reporting season.
Credit Suisse and Barclays are also paring staff as banks slash expenses to meet ambitious profit targets.
Fixed-income trading revenues, the profit engine for most investment banks since the financial crisis, fell sharply at the biggest US banks in the second quarter compared to the first three months of the year.
Analysts expect European investment banks to report similar declines as clients scale back risk exposure in an uncertain macroeconomic climate.
Credit Suisse is expected to suffer the steepest percentage fall in revenues from its fixed-income, currency and commodities division of the big four European investment banks, with Morgan Stanley forecasting a 41 per cent quarter-on-quarter decline.
A significant rise in mergers and acquisitions activity and underwriting of debt and equity issues would partially plug the gap for European banks, analysts said. Globally, investment banking fees rose 23 per cent year on year in the first half, and 26 per cent in Europe, according to Thomson Reuters.
Overall, investment banking revenues at Deutsche Bank, UBS and Credit Suisse will be down by an average of 25 per cent from the seasonally strong first quarter, while net profits are expected to have tumbled by an average of 49 per cent over the same period, according to analysts at Citigroup.
In the UK, investment banking revenues at Barclays and Royal Bank of Scotland Group are expected to be down about 30 per cent from the first half of 2010, with pre-tax profits falling a similar amount on average.