Financial Results

UBS's Wealth Arm Logs Q1 Inflows; US Litigation Dents Reported Profit

Tom Burroughes Group Editor London 25 April 2023

UBS's Wealth Arm Logs Q1 Inflows; US Litigation Dents Reported Profit

The profit figure was affected by an increase in provisions of $665 million related to a US residential mortgage-backed securities litigation matter. More broadly, the bank, which is in the process of acquiring Credit Suisse, logged net inflows into its global wealth management business.

UBS, which is acquiring and integrating Credit Suisse, today announced that it made first-quarter 2023 pre-tax profit on a reported basis of $1.495 billion, sliding by 45 per cent on a year. Net credit loss costs rose to $38 million from $18 million a year ago, while total operating costs rose by 9 per cent. The profit figure was affected by an increase in provisions of $665 million related to a US residential mortgage-backed securities litigation matter which dates back 15 years.

Net profit attributable to shareholders sank by 52 per cent to $1.029 billion in the quarter. 

On an underlying basis, Switzerland’s largest bank said Q1 pre-tax profit stood at $2.354 billion, a year-on-year decline of 22 per cent, with underlying revenue down by 8 per cent and operating costs down by 2 per cent. The cost/income ratio was 72.8 per cent.

In the quarter, UBS bought back $1.3 billion of its shares under a new share repurchase programme. It has temporarily suspended share repurchases after announcing in March its acquisition of Credit Suisse. UBS said it intends to renew buybacks as soon as possible. 

At the end of March, the UBS Common Equity Tier 1 capital ratio – a standard international yardstick of capital buffer – was 13.9 per cent and its CET1 leverage ratio was 4.4 per cent, ahead of its guidance.

The firm said it attracted $38 billion of net new money into its global wealth management arm, of which $7 billion came in the last 10 days of March after the Credit Suisse acquisition was announced. 

The group said it also logged $20 billion in net new fee-generating assets in global wealth management, and $14 billion of net new money in asset management. 

“Overall, we saw broadly stable loan balances as loan growth in Switzerland offset deleveraging in other regions. As clients repositioned their investments in response to interest rate increases, we captured demand for higher yield into money market funds and US-government securities,” the bank said.

“We delivered these results during a quarter characterised by persistent concerns about interest rates and economic growth exacerbated by questions about the stability of the banking system, especially in the US. Against this backdrop, private and institutional investors' activity remained muted,” it said. 

Within GWM, total revenues fell 2 per cent year-on-year to $4.792 billion and net interest income rose 31 per cent, mainly resulting from higher deposit revenues as interest rates rose, although this was parly offset by lower-margin deposit products. Transaction-based income decreased 12 per cent, mainly driven by lower levels of client activity across all regions, it said.

In the Americas region, global wealth management attracted net new fee-generating assets of $4 billion. In Switzerland, the group logged $8 billion of net new fee-generating assets. UBS generated $3 billion of net new fee-generating assets in the EMEA region, and $5 billion of such assets in the Asia-Pacific region. 

“We expect the combination with Credit Suisse to strengthen our position as a leading and truly global wealth manager, with around $5 trillion in invested assets. We also expect to reinforce our position as a leading universal bank in Switzerland, and to enhance our complementary investment banking and asset management capabilities, while adding strategic scale in the most attractive growth markets,” it said. 

The bank said it intends to “actively reduce” the risk and resource consumption of Credit Suisse’s investment banking business. It plans for the combined investment bank (excluding assets and liabilities that we define as non-core) to account for around 25 per cent of group risk-weighted assets.

“While acknowledging the magnitude of, and complexity associated with, the integration and restructuring of Credit Suisse, we believe that this combination presents a unique opportunity to bring significant, long-term value to all of our stakeholders,” UBS said. 

Sergio Ermotti, chief executive, said: "We are focused on completing the acquisition of Credit Suisse, most likely in the second quarter of 2023, which will advance our strategy, particularly in Global Wealth Management and Switzerland. The complexity of the integration will require sustained diligent effort. While we execute these changes, we will not be distracted from our primary focus: supporting our clients with advice and solutions."

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