UBS Group AG Chief Executive Officer Sergio Ermotti said he expects market volatility to increase this year from the “very low” levels which have hampered trading income and fees.
“If I look into 2018, I do expect probably a more normalized environment for volatility than the one we saw in the last few quarters,” Ermotti said in an interview with Bloomberg Television on Monday, adding that volatility in foreign exchange trading and equities is still “very, very low.”
Low volatility hurts investment-banking revenue by removing trading opportunities. Deutsche Bank issued a profit warning on Friday, saying that revenue at the German bank’s securities unit probably dropped about 22 percent in the final quarter because of persistent low volatility in markets and muted client activity. Analysts had expected revenue to increase.
UBS’s investment bank has contributed less than a quarter of pretax profit in recent years after Switzerland’s largest lender pulled out of riskier trading activities to focus on managing the money of the world’s wealthiest individuals. Andrea Orcel, the investment bank head, last month predicted 2018 will be another challenging year for securities firms.
Ermotti expects new wealth management head Martin Blessing to continue to develop the “very successful” business after Juerg Zeltner stepped down last month. “There is no revolution, there’s an evolution,” he said.