Lionel Laurent is a Bloomberg Gadfly columnist covering finance and markets. He previously worked at Reuters and Forbes.

The election of Emmanuel Macron in France vindicated euro optimists, boosted stock markets and paved the way for lenders like Deutsche Bank AG and Credit Suisse Group AG to raise extra capital.

What it didn't do was unleash a wave of revenue growth for Europe’s top investment banks -- at least judging by their latest quarterly earnings.

Moving Up
European bank stocks have outperformed the wider benchmark over the past year
Source: Bloomberg

The combination of still-low interest rates and anemic market volatility sapped trading revenue at UBS, Credit Suisse and Barclays, while advisory fees were mixed. Trading income fell by some 6 to 7 percent, following on from Deutsche Bank’s 18 percent decline yesterday.

“Where we are being challenged,'' Credit Suisse CEO Tidjane Thiam says, is "volatility."

Disappearing Act
Volatility has evaporated this year, to the chagrin of Europe's bankers
Source: Bloomberg

To be sure, Wall Street is suffering from the same becalmed markets, with even the mighty Goldman Sachs hit by a torrid quarter for commodities. And wealth management, where rich clients seem ready to put cash to work, also helped Credit Suisse and UBS hold up revenue better than Deutsche and Barclays.

But there seems to be no let-up in the pressure to cut costs. That's the lever every firm is pulling to try and improve earnings. Having bolstered capital and started to trim costs, though, the returns these businesses generate still look rather feeble.

Lost Decade
For Europe's biggest banks, return on equity is still a long way from its pre-crisis level
Source: Bloomberg Intelligence

Credit Suisse is ahead of schedule in its plan to trim adjusted expenses to less than 17 billion Swiss francs in 2018 from 18.5 billion francs in 2017. But return on tangible equity is still weak at 3 percent. At Barclays, the figure is a meager 7.2 percent -- even once some messy one-time charges are excluded. We are some way off a viable industry return on equity of about 10 percent.

Despite CEOs’ confident talk of gaining market share and redeploying capital in investment banking, the mood seems uncertain. Investors punished UBS, which trades at a premium to its peers, for losing ground on capital strength, sending the stock down more than 2 percent. Barclays and Credit Suisse shares fared better but still trade at a 40 and 20 percent discount to book value.

Political stability and a resurgent euro area economy might eventually be enough to put interest rates on the path to normality. The withdrawal of central-bank stimulus would give a fillip to revenue. Some executives are confident volatility will eventually pick up, which might help European lenders claw back share from dominant U.S. rivals.

But that's playing a long game in a market where Wall Street has spent years mopping up. The Macron effect has spared bank investors the worst, but it has yet to deliver the best.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Lionel Laurent in London at

To contact the editor responsible for this story:
Edward Evans at