Financial Results

UBS Q2 Earnings, Asset Management Stands Out

Editorial Staff July 23, 2019


UBS weathers low interest rates and global slowdown with a better than expected Q2.

UBS beat analysts’ forecasts in second quarter results this week, posting a net profit of $1.4 billion, up by just 1 per cent year-on-year. The Swiss lender’s adjusted cost-income ratio came in at 76.1 per cent. The Americas was one of its most profitable regions and its investment banking division saw the biggest year-on-year decline.

The bank’s flagship wealth management division posted pre-tax profit of $886 million, down by 12 per cent year-on-year. Net fee income recovered quarter-on-quarter but was down on the same period last year. Transaction-based income rose by 3 per cent, but net interest income fell. Regionally, the Americas posted record profits for the division, which saw an adjusted cost/income ratio of 78.1 per cent. The bank reported that outflows of $2 billion were largely driven by seasonal tax-related withdrawals in the US. Invested assets increased by $54 billion, 2 per cent up for the quarter.

UBS’ asset management arm posted strong results, with a pre tax profit of $135 million, up by 10 per cent from a year ago, and largely down to increased management fees and slightly higher average invested assets. Performance fees also rose by $4 million. The closely-watched adjusted cost/income ratio improved rising to 71.7 per cent. Invested assets also rose to $831 billion, while net new money outflows stood at $13.9 billion.

The group’s investment banking division recorded another quarterly decline, delivering pre-tax profits of $440 million, down by 23 per cent from a year ago. Equities revenue was down by 9 per cent, due to lower client activity and market volatility, the bank said; and its FX, rates and credit business was also down by approximately 7 per cent from a year ago. The bank’s investment arm posted an adjusted cost/income ratio of 78.7 per cent. Its advisory and capital markets business posted an 18 per cent increase from a year ago largely down to increasing fees and revenue from record M&A activity.

The Swiss bank said its capital position remains strong, with a total loss-absorbing capacity of $87 billion.

"In the second quarter we achieved the highest 2Q net profit since 2010 and an improvement on an already strong 2Q18. Once again we showed the strength of our business model and its ability to generate competitive returns even with market conditions far from last year’s,” said group CEO Sergio Ermotti.

Looking ahead, the Swiss lender said that the pace of global growth had stabilized but that downside risks remain.

“Central banks are indicating a reversal of monetary policy normalization and embarking on new stimulus measures. A sharp drop in interest rates and expected rate cuts will continue to adversely affect net interest income compared with last year. Our regional and business diversification, along with higher invested assets benefitting recurring revenues, will help to mitigate this. An improvement in investor sentiment and higher market volatility could help to offset the typical third quarter seasonality.”

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