UBS profit jumps 63% in second quarter amid boom in wealth management
ZURICH (Reuters) – UBS reported a 63% increase in second-quarter net profit on Tuesday, widely beating expectations as dynamic markets continued to help the world’s largest wealth manager generate higher profits by managing the money of the rich.
The Swiss bank’s net profit of $ 2.01 billion far exceeded expectations of $ 1.34 billion in a poll of 20 analysts compiled by the group, as commission income surged and prices of assets increased in its private banking and asset management activities.
“The momentum is on our side. We have no intention of letting go, ”Managing Director Ralph Hamers told analysts on a phone call, adding that in every region, the bank had recorded its highest profit levels in more than five years.
“You can expect us to continue to focus on growth on the wealth side, but also efficiency (as we) continue to invest.”
UBS shares traded up 4.6% soon after the market opened, while the Swiss market benchmark was up 1.0%. Analysts point to higher-than-expected revenues in all areas and “well contained costs,” as noted by Jefferies in a note.
Hamers, at the top of the rankings since November, has set his sights on digitization to help win more business from the lower echelons of the world’s wealthy. UBS sees the potential for a new online platform to make $ 30 billion next year after launching in May 2020, Reuters reported in June.
This platform continued to register entries throughout the second quarter, as an additional $ 0.5 billion since early June brought its invested assets to $ 4.2 billion.
UBS recorded $ 25 billion in new commission-generating client inflows across wealth management on Tuesday, thanks in part to strong growth in the United States, where it is seeing an increase in business with the ultra-rich. . Combined with strong markets, this helped push the assets invested in its global wealth management business up 4% sequentially to $ 3.2 trillion.
Trade between its rich and ultra-rich clients also remained strong, helping Switzerland’s largest bank to increase pre-tax profits by 47% in its flagship business, as the increase in lending also helped offset the impact. the fall in interest rates on its net interest income.
DECLINE IN MARKET VOLUMES
The first of the major European banks to report earnings, UBS followed its US peers in crushing earnings estimates. An economic recovery and an increase in transactions helped JPMorgan, Goldman Sachs, Citigroup and Bank of America to realize all of their profits in the second quarter.
But trading revenues were hit as lenders failed to match the comparables from the previous year, when unprecedented volatility in the early months of the coronavirus pandemic helped generate record volumes. .
UBS, likewise, saw its revenues fall by 14% in its trading activities in global markets, although the decline was less pronounced than with some US lenders. He signaled that the decline in transaction volumes could continue into the current quarter.
“We expect our revenue in the third quarter of 2021 to be influenced by seasonal factors, such as lower levels of customer activity compared to the second quarter of 2021,” its outlook statement said.
An increase in transaction advisory income helped offset weaker market profits, increasing its investment bank’s pre-tax profit by 9% overall. M&A advisory revenues more than tripled in the second quarter, while in capital markets they increased 35%.
UBS announced in April an unexpected loss of $ 774 million following the collapse of US investment fund Archegos, bringing the total damage to global banks to more than $ 10 billion.
The default of Archegos had a much bigger impact on Credit Suisse. UBS’s city-wide rival has been under pressure to work out an overhaul plan since it suffered a more than $ 5 billion blow to Archegos, in the wake of the 10 billion dollar implosion. dollars in funds linked to supply chain finance company Greensill Capital.
Credit Suisse reports its results on July 29, after Deutsche Bank on July 28.
On Tuesday, UBS confirmed a new business loss of $ 87 million related to the Archegos case for the second quarter, as previously reported.
In Switzerland, UBS’s retail and retail banking business saw pre-tax profits double, helped by a pickup in economic activity as its home country eased COVID-related restrictions this year .
Reporting by Brenna Hughes Neghaiwi; Editing by Kenneth Maxwell