Strong trading activity, coupled with a rebound in investment banking, drove the large European investment banks to their best second quarter results in almost a decade, according to Morningstar DBRS Inc.
In a report Thursday, the rating agency said the big European banks — UBS Group AG, Deutsche Bank AG, Barclays Bank plc, and BNP Paribas SA — delivered strong quarterly performance, thanks to robust growth in equity sales and trading amid elevated market volatility, along with an improvement in revenues from securities underwriting and M&A advice.
Aggregate capital markets revenues for the group rose by 22% to US$15.4 billion in the second quarter, compared with the same quarter a year ago, and were up 36% from 2024.
Trading revenues rose by 22%, driven by strength in equities, in an environment of heightened volatility and increased client activity.
At the same time, investment banking revenues were up 24% from last year.
Growth in advisory revenues in the second quarter was underpinned by “a healthy volume of mergers and acquisitions transactions,” DBRS noted — although these revenues were down by 10% from the first quarter.
And, despite the positive quarterly performance for the European banks, they still trailed the gains reported by their Wall Street rivals, the report noted, as the large U.S. banks posted a 77% jump in equity trading revenues and a 46% gain for investment banking in the second quarter.
The Wall Street firms benefited from the soaring AI sector, “which provided a notable boost to both equity underwriting and advisory revenues,” it said.
Looking ahead, DBRS said it expects elevated market volatility to persist this year, underpinned by geopolitical and economic uncertainty, which should continue to support the European banks’ capital markets businesses, particularly trading revenues.
It said the M&A deal pipeline is expected to remain strong for the rest of the year too.