UBS, Deutsche Bankand Credit Suisserounded off their worst years by announcing bruising fourth-quarter losses, battered by a combination of writedowns, trading losses and bad debts. At the heart were the investment banking units, the source of more than one third of pre-tax profit at UBS and Credit Suisse in the heyday of 2006 and almost two thirds at Deutsche Bank.
The industry is now pinning its hopes on fewer competitors, higher margins and a surge in client demand for trading foreign exchange, interest rates and commodities. Investment banks have been able to slash costs more quickly than commercial banking rivals by cutting bonuses and firing staff.
However, regulatory pressure and the plunging appetite for risk have wiped out a swathe of lucrative businesses, ranging from securitisation to proprietary trading.