If you believe everything US investment bankers tell you, it is only a matter of time before a handful of American giants rule the world, and Europe’s challengers crumble into the dust.
You can see why they are so confident, with Britain splitting its would-be universal banks with a ring-fence, and a series of major European lenders bailed out in the financial crisis.
But UBS thinks it has come up with a model that can work on its own terms, focusing on the sectors it knows best.
Judging by yesterday’s financial results, it is working so far.
Profits for the Swiss bank overall shot up 88 per cent on the year, to 1.98bn Swiss francs (£1.4bn) in the first quarter.
Its investment banking arm was a major contributor to that growth, with an operating profit of SFr774m, up 82 per cent on the year.
Equity capital markets (ECM) performed well, with income rising 56 per cent to SFr306m, as the bank rose up the sector league tables from eighth in the first quarter of 2014 to second this year. Even as the number of ECM deals fell, it managed to land a bookrunner role on more transactions.
Not every area performed well – debt capital markets income fell 53 per cent to SFr143m, in part due to losses on energy industry deals just before the oil price dived – but the bank is confident it is on track to outperform its rivals.
Its return on tangible equity climbed to 17.8 per cent, up from 10.2 per cent a year ago.
This compares favourably with the four per cent return on average shareholders’ tangible equity at Barclays, and the 3.1 per cent post-tax return on average active equity at Deutsche Bank.
And it was even above the relatively healthy return on average common shareholders’ equity at Goldman Sachs, which came in at 14.7 per cent.
Chief executive Sergio Ermotti praised the “strict discipline” at the investment banking unit as a key factor in boosting results.
And investors agreed, with shares jumping by 4.75 per cent on the results.
The long-term future of the investment bank depends on capitalising on these strengths on an ongoing basis. Other big banks have tried to diversify, to make sure that a downturn in one business will not result in a fall in profits for the whole bank.
For instance, profits in fixed income, currencies and commodities (FICC) trading rocketed 71 per cent to SFr701m, in part due to enormous volatility in the Swiss franc when the Swiss central bank removed its cap on the currency against the euro.
The more focused UBS is in a handful of areas, the more likely that big one-offs will affect its business.
It has succeeded in outperforming rivals this time, but had extra factors in its favour.
Litigation costs, for instance, came in at just SFr58m, well below the SFr375m expected by analysts at Jefferies.
Once its rivals get past the huge legal costs from the pre-crash years, they may come roaring back, just as UBS has, to challenge its apparent revival.
|UBS HAS WON MORE ECM BUSINESS SO FAR THIS YEAR|
|2015 Q1 ranking||Bank||Value $m||Deals||2014 Q1 ranking|
|3||Bank of America Merrill Lynch||15251||85||3||-|
|10||Wells Fargo||4593||34||(Not in top 10)|