Despite an uptick in investment banking revenues in the first quarter of this year, the extended run of falling revenues over the past several years has investment banks scrambling to find new sources of income. In some cases, this has meant increasing their focus on certain service offers which have proven to be more robust, such as fixed income origination as well as corporate advisory. However, this has often not been enough to satisfy the demands of investors. Some firms are increasingly looking beyond their traditional areas of operation and expanding into new, higher growth, developing markets. While Asia has long been a common destination for investment banks seeking growth opportunities, recent economic trends in the region, along with tightening regulations, have begun to discourage new entrants. As a result, institutions are being forced to be even more creative in scanning the globe for growth opportunities.
Turkey Becomes Target for UBS
One investment bank that is looking beyond the traditional markets of North American, Europe and Asia is UBS. While the Swiss-based bank slashes 10,000 jobs elsewhere throughout its organization, it is actively expanding its operations in Turkey due to a positive outlook on the country and increasing demand for its services. According to Bloomberg news, UBS currently employs a small team of 30 professionals in its Turkey office, though that is expected to grow considerably. Offerings in debt capital markets, equities trading, research and corporate advisory comprise the bank’s operations in the region. As UBS struggles globally, posting a second straight quarterly loss, operations in the developing country are a positive development, albeit a small one.
“Things have been quite busy and we’re enjoying a good momentum,” Gonca Gursoy Artunkal, the UBS chief executive for Turkey, told Bloomberg, “We’re trying to evaluate the potential in the space and looking to see what additional value we can bring clients here in Turkey.”
Market Regulation to Weigh In on Asset Management Operations
The Turkish market regulator is also in the process of drafting new asset management regulations, attempting to provide ground rules for the industry. Following the finalization of these rules, UBS will begin to explore whether or not to enter into asset management operations in the country. While global regulations are generally trending against investment banking in much of the world, some developing countries are eager to invite investment banks in to provide much needed capital. If Turkey elects to adopt favorable rules for asset managers, it will likely see many new firms from abroad. UBS’s position as an established player in the region, however, may provide the firm an advantage.
UBS is following the lead of other international players, such as Russian Sberbank and Diageo Plc, who have recently been attracted to the Mediterranean nation with an $800 billion economy and growth prospects exceeding 4 percent per year. With an economic outlook as strong as Turkey’s is today, it is only a matter of time before more investment banks look to establish a presence in the country.