Financial Services

UBS posts highest quarterly net income in almost a decade

Bank sees turnaround after slow first quarter

Photograph: Arnd Wiegmann/Reuters

Tue Jul 23 2019 - 07:03

UBS chief executive Sergio Ermotti saw a revival of the bank's fortunes in the second quarter after what he'd called one of the worst starts to the year in recent history.

The Zurich-based lender posted its highest net income in almost a decade, helped by record profit at its wealth management business in the Americas and a stronger performance at the investment bank, according to a statement on Tuesday. While the lender warned that global growth has stabilised at a lower level, it signalled that an improvement in investor sentiment and market volatility could help offset the typical slowdown in the third quarter.

“We achieved the highest second quarter net profit since 2010 and an improvement on an already strong second quarter of 2018,” Mr Ermotti said in a statement.

UBS is seeking to rebound from a slew of bad news of late, ranging from investor discontent with strategy to the departure of its former investment bank head and a $5 billion (€4.46 billion) penalty in a French tax case. That's left the stock trailing a rebound seen by rivals Credit Suisse and Barclays this year and Mr Ermotti struggling to regain his footing.

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Domestic business

UBS, like peers Credit Suisse and Julius Baer, is battling negative interest rates at home and - unlike US banks - unable to fall back on a booming domestic business. It also saw negative net new money of about $2 billion in the second quarter, driven by tax-related outflows of about $5.1 billion in the US.

A year earlier, the bank saw almost 9 billion francs (€8.16 billion) of withdrawals related to US taxes and a corporate employee share program.

It’s been a year so far of fluctuating fortunes for the world’s largest wealth manager. Mr Ermotti earlier this year joined a chorus of Wall Street executives warning the market environment remains shaky, even after improving from a first quarter which he’d called one of the worst in recent history.

Investment bank adjusted profit before tax fell 23 per cent from a year ago, led by income from the advisory and equity capital markets business. Revenue from trading equities was down 9 per cent and fixed income trading down 7 per cent. Analysts have suggested Deutsche Bank’s move to retrench in equities and cut thousands of jobs globally could be a chance for UBS to take market share. – Bloomberg

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