(Bloomberg) -- U.S. investment banks will continue to outstrip their European peers in the first quarter thanks to higher interest rates and outlays on technology, according to analysts at Morgan Stanley.
Revenue for U.S. investment banks will increase by 8 percent from the year-earlier period, while the Europeans will see a 1 percent drop in dollar terms, analysts including Magdalena Stoklosa wrote in a note to clients on April 3. Better investments in electronic trading and a greater ability to deploy capital also explain Wall Street's advantage, they wrote.
Among European investment banks, Deutsche Bank AG is the “most challenged,” the analysts wrote. Morgan Stanley analysts cut their 2018 earnings forecast for the German giant by 25 percent after a reduction of revenue from the investment bank. Societe Generale SA, UBS Group AG and Barclays Plc “look best” for the quarter, they said.
After a strong start to the first quarter for Wall Street trading desks, momentum has slowed somewhat, with Morgan Stanley President Colm Kelleher saying that industry-wide revenue will probably be unchanged from a year earlier. In Europe, Tidjane Thiam, the head of Credit Suisse Group AG, has spoken of a “very confused” first quarter that left clients once again sitting on the sidelines.
To contact the reporters on this story: Stefania Spezzati in London at sspezzati@bloomberg.net, Hanna Hoikkala in Stockholm at hhoikkala@bloomberg.net.
To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Patrick Henry, Darshini Shah
©2018 Bloomberg L.P.
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