UBS struggled with the collapse of its client Archegos.
(Photo: Reuters)
Zurich Thanks to a booming trading business, UBS got off to the best start to the year since 2007. The bottom line is that the largest Swiss bank earned 2.1 billion dollars from January to March, 17 percent more than in the same period last year.
The jump in profits compared to the first quarter of 2021 is mainly because the collapse of hedge fund customer Archegos weighed on the bank’s results. Nevertheless, UBS exceeded analysts’ expectations: According to a survey conducted by the bank itself, they had expected a surplus of $1.8 billion for the first quarter.
The return on equity reached 19 percent and thus exceeded the target range raised to 15 to 18 percent in February. The market turbulence caused by the Ukraine war led to record high earnings in the trading division. In the difficult environment, customers trusted the advice of UBS, said CEO Ralph Hamers. “And as volatile markets increased trading volumes, we managed high transaction volumes, managed risk and provided access to liquidity.”
However, the core business with the rich and super-rich has recently weakened somewhat: the pre-tax profit of wealth management (Global Wealth Management) fell by seven percent. Especially in the two most important markets, North America and Asia, UBS suffered losses.
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Pre-tax profits in US wealth management fell 6 percent and in Asia as much as 38 percent. Profits in Switzerland and Europe could not have compensated for losses in the Asian business, said UBS. Hamers said investors remain cautious in Asia.
Equity trading revenue at record high
In addition, UBS reduced credit risks in the region. In addition, the bank’s asset management costs increased, among other things due to higher costs for legal cases.
Things went much better in the investment bank: in the same period last year, the Archegos bankruptcy had burdened the division. Now the proceeds in stock trading rose by 85 percent to 1.7 billion dollars – as much as never before. The high fluctuations in the market also benefited the bank in trading with currencies and derivatives.
The bank benefited from rising interest rates and new money. Customers contributed another $19 billion in fee-generating assets to the institute. Pre-tax profit also increased in the Swiss home market. Only in asset management did UBS post a lower result. The bank reduced exposure to customers related to Russia to $0.4 billion during the quarter. At the end of 2021, Russia’s direct country risk was still $0.6 billion.
With material from Reuters.
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