UBS posts best second quarter in almost a decade despite wealth management troubles
UBS reported its strongest second-quarter set of results in almost 10 years this morning, trumping analyst estimates for net profit despite nursing losses in its flagship wealth management unit.
While the Swiss group also echoed a number of its global financial peers by posting a fall in investment banking, retail and corporate banking helped push second-quarter profits above market expectations.
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The world’s largest wealth manager reported a one per cent rise in net profit to $1.4bn (£1.1bn) during the second quarter, marking a rise from analysts’ consensus forecast for a near-25 per cent drop, according to a poll compiled by the bank.
UBS said that the three-month period marked the highest second-quarter net profit since 2010.
However, profits before tax in the firm’s crown jewel of wealth management hit $886m, falling 12 per cent compared with the same quarter in the previous year.
Investment banking profits also plunged 23 per cent, reflecting headwinds in a market that has been hit by global uncertainty and expectations of falling interest rates.
“A sharp drop in interest rates and expected rate cuts will continue to adversely affect net interest income compared with last year,” UBS said.
Chief Executive Sergio Ermotti said in a statement: “In the second quarter we achieved the highest second-quarter net profit since 2010 and an improvement on an already strong second-quarter 2018.”
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In the previous quarter, UBS revealed plans to cut costs by an additional $300m, with Ermotti pledging to put the firm in “fuel-saving mode” by delaying IT projects and slowing down on hiring.
The news comes a day ahead of European peer Duetsche Bank’s quarterly results, where it is expected to outline the costs of its dramatic restructuring path.
“Today’s latest Q2 numbers from UBS highlight the problems Deutsche Bank is likely to face. UBS wealth management division saw its profits miss estimates on a decline of $75m in net income as increased competition drove down revenues from wealthy clients,” said Michael Hewson, chief market analyst at CMC Markets.
He added: “This situation isn’t likely to get any better, as more banks chase a finite number of clients. It’s also a trend that has been noticeable in other banks earnings announcements in this quarter.”