Wealth management drives UBS profits surge

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UBS reported a surge in second-quarter profits, as an easing in pandemic restrictions during the spring helped drive business at its wealth management division.

Net profit for the three months to the end of June climbed to $2bn, up 63 per cent from a year ago, and comfortably exceeding the $1.35bn analysts had forecast.

“Momentum is on our side and our strategic choices and initiatives are paying off,” said chief executive Ralph Hamers said in a statement on Tuesday.

“Our growth in the second quarter was underpinned by the relationships we have built and strengthened throughout the pandemic,” he added.

Since taking over in November, Hamers has seen UBS benefit from the bank’s focus on its wealth management business. Assets invested on behalf of clients by the bank through its global wealth management and asset management divisions rose 4 per cent during the quarter to $4.4trn.

UBS’s flagship global wealth management division contributed profits before tax of $1.3bn, up 47 per cent year-on-year, as wealthy clients shifted investments into more complicated, higher-margin products.

In investment banking, profits rose 9 per cent to $668m, with higher M&A advisory fees more than offsetting revenue declines in global markets and prime brokerage.

Profits in personal and corporate banking doubled to $456m from a year ago. The bank said resurgent consumer spending as pandemic-related restrictions lifted was responsible for a surge in income from credit cards and foreign exchange.

Despite collapsing income in UBS’s hedge fund business, where performance fees dropped 46 per cent in the quarter, the asset management division reported profits of $255m, up 62 per cent, thanks rising valuations and performance fees in its global equity products.

The bank also strengthened its balance sheet during the pandemic. Its core equity tier one capital ratio — a key measure of financial strength — rose to 14.5 per cent, ahead of the bank’s 13 per cent target.

Uncertainty nevertheless remains over several looming court cases, the bank said.

UBS has provisioned $2bn so far to cope with expected legal costs. The result of an appeal against a court decision in France over tax fraud is expected in September, the bank said. A parallel case is also under investigation by Belgian authorities. And UBS is facing cases relating to the sale of US mortgage-backed securities and the Madoff investment fraud.

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