SWISS bank UBS yesterday shocked the City with the worst set of third quarter numbers from the banking sector so far, with muted client activity in the wealth management division compounded by a spectacularly poor investment bank performance.
Pre-tax profit crumbled by over two thirds quarter-on-quarter to SwFr818m (£524m), 45 per cent below consensus analyst forecasts of SwFr 1.5bn.
UBS’ investment bank was the main drag on the results, reporting a pre-tax loss of SwFr406m compared to a profit of SwFr1.3bn in the second quarter, due to subdued client activity levels and low market volumes. Fixed income, currencies and commodities were particularly weak, the bank said, while it was also hit by subdued investor demand for equities.
UBS’ core wealth management business put in a strong performance, attracting net inflows of SwFr1bn. But the bank admitted that the gross margin on invested assets had decreased six basis points to 89 basis points, prompting a 25 per cent fall in the division’s pre-tax profit to SwFr492m.
Execution Noble analyst Fiona Swaffield said the inflow of new money in wealth management was a “significant positive”. But she said the rest of the numbers were disappointing and highlighted a wider concern that compensation costs across the investment banking sector can no longer adequately accommodate wide fluctuations in profitability in the wake of regulatory changes.