UBS revenue leaps 63% in Q2 amid wealth administration growth
- Second quarter net income $ 2.01 billion, beating analysts estimate of $ 1.34 billion
- $ 25 billion in new bill-generating customer inflows in the second quarter
- Focus on digitizing to get more business
- Stocks up 4.6%; Analysts point to strong sales
ZURICH, July 20 (Reuters) – UBS (UBSG.S) posted a 63% increase in net income for the second quarter on Tuesday, slightly beating expectations as buoyant markets continued to help the world’s largest asset manager generate higher revenues from the Administration of funds for the empire.
The Swiss bank’s net income of $ 2.01 billion far exceeded expectations of $ 1.34 billion in a group-compiled survey of 20 analysts as fee income rose and asset prices rose in the private banking and wealth management businesses .
“The momentum is on our side. We have no intention of letting go,” Chief Executive Ralph Hamers told analysts on a call, adding that the bank had its highest profit in any region in more than five years.
“You can assume that we will continue to focus on growth on the asset side, but also on efficiency (as we) continue to invest.”
Shortly after the market opened, UBS shares traded 4.6% higher, while the Swiss benchmark index rose 1.0%. Analysts generally point to higher than expected revenues and “well-contained costs,” as stated in a note by Jefferies.
Hamers, in the top position since November, has its sights set on digitization to attract more business from the lower echelons of the world’s wealthy. UBS sees potential for a new online platform that will raise $ 30 billion next year after launching in May 2020, Reuters reported in June. Continue reading
That platform continued to see inflows in the second quarter as an additional $ 0.5 billion increased its invested assets to $ 4.2 billion since early June.
On Tuesday, UBS saw $ 25 billion in new paid client inflows across wealth management, thanks in particular to strong growth in the United States, where business with the ultra-rich is growing. This, combined with strong markets, helped invested assets in his global wealth management business to grow 4% sequentially to $ 3.2 trillion.
Trading with its wealthy and ultra-rich clients also remained strong, helping the largest Swiss bank increase its pre-tax profit in its flagship business by 47% as higher lending also helped offset the burden of lower interest rates on its net interest income.
MARKET VOLUME REDUCED
UBS is the first of the major European banks to publish earnings, and has followed its US peers on overwhelming earnings estimates. An economic rebound and a leap in business performance helped JPMorgan (JPM.N), Goldman Sachs (GS.N), Citigroup (CN) and Bank of America (BAC.N) all grow their earnings in the second quarter. Continue reading
However, trading revenues suffered a slump as lenders failed to match last year’s comparative figures when unprecedented volatility in the first few months of the coronavirus pandemic helped drive record volumes.
UBS also saw a 14% decline in sales in its global trading business, though the decline was less pronounced than that of some US lenders. It became apparent that the lower trading volumes could continue in the current quarter.
“We assume that our sales in the third quarter of 2021 will be influenced by seasonal factors, such as lower customer activity compared to the second quarter of 2021,” says the outlook statement.
An increase in revenue from advising on transactions helped offset the decline in market results and increased the investment bank’s pre-tax profit by a total of 9%. Revenue from advisory services on mergers and acquisitions more than tripled in the second quarter, while it rose by 35% on the capital market.
UBS reported an unexpected loss of $ 774 million in April from the collapse of US mutual fund Archegos, which hit global banks over $ 10 billion in total.
The Archegos failure has a much bigger impact on Credit Suisse (CSGN.S). UBS’s metropolitan rival is under pressure to come up with a revision plan since Archegos hit more than $ 5 billion, hot on the heels of the $ 10 billion implosion of funds affiliated with supply chain finance firm Greensill Capital . Continue reading
Credit Suisse will report its results on July 29th, after Deutsche Bank (DBKGn.DE) on July 28th.
On Tuesday, as previously announced, UBS confirmed another trading loss of $ 87 million from the Archegos affair for the second quarter.
In Switzerland, UBS’s domestic corporate and retail business doubled its pre-tax profit, helped by a pickup in economic activity as its home country eased COVID-related restrictions this year.
Reporting by Brenna Hughes Neghaiwi; Edited by Kenneth Maxwell
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