UBS Group AG posted better-than-expected profit in the second quarter after Switzerland’s largest bank benefited from surging new assets and fee income, while warning that it expects a slowdown in client activity.
Its net income of US$2 billion beat analysts’ estimates after invested assets in private banking and asset management increased 4 percent to about US$4.5 trillion from the previous quarter. Recurring fee income increased 30 percent from a year earlier in wealth management, while transaction-based earnings gained 16 percent.
CEO Ralph Hamers is benefiting from buoyant markets and client demand after UBS pivoted away from more volatile investment banking to helping the rich manage their fortunes.
The wealth management business saw US$25 billion of inflows of net new fee-generating assets across all regions and also made US$7 billion in net new loans to rich clients in the quarter as it seeks to deepen relationships with wealthy families.
The bank said it is focusing on growth in the largest and fastest growing markets of the US and Asia-Pacific region, while warning activity is set to moderate.
“We expect our revenues in the third quarter of 2021 to be influenced by seasonal factors, such as lower client activity levels compared with the second quarter,” it said.
“Higher asset prices should have a positive effect on recurring fee income in our asset gathering business,” it said, while warning of “continued uncertainty about the environment and economic recovery.”
UBS reported wealth management pretax profit of US$1.29 billion in the second quarter, compared with analysts’ estimates of US$1.18 billion, while investment bank pretax profit of US$668 million was higher than analysts’ forecasts of US$414.1 million.
At the investment bank, UBS benefited from its focus on equities in the second quarter, which partially compensated for lower revenue in foreign exchange, rates and credit. This included an US$87 million hit from the collapse of Archegos Capital Management LLC that UBS had already flagged in the first quarter, when it booked a surprise US$774 million hit from Archegos.
Alongside its US peers, UBS is navigating a slump in trading revenues as the COVID-19 pandemic-induced volatility in markets is fading. Global banking revenue, which includes the business of advising on deals and capital raisings, surged 68 percent, helping offset weakness elsewhere in the investment bank.
The bank also expects merger-and-acquisition and equity capital markets activity to remain high in the third quarter. UBS more than doubled its revenue in its advisory business in the second quarter, driven by mergers and acquisitions.
UBS took an US$89 million restructuring charge in the second quarter, compared with the US$300 million expense it had signaled in the first quarter, indicating the bank might not have dismissed as many people as expected.
The bank plans to buy back US$600 million of shares in the third quarter, it said.
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