Global Wealth Profit Holds Steady At UBS

Tom Burroughes

21 July 2020

The global wealth management division of today said that its pre-tax profit in the second quarter of this year rose by 1 per cent year-on-year to $880 million, helped by stronger transaction-based income and net interest income.

Pre-tax income growth in Asia and Europe rose significantly, the Zurich-listed banking group said.

Across the overall UBS group, including all divisions, pre-tax profit was $1.582 billion, falling by 10 per cent on a year ago, but it would have been up if credit loss expenses (linked to the global pandemic) were stripped out.

UBS said that its cost/income ratio tightened slightly to 75.8 per cent. The net profit attributable to shareholders was $1.232 billion, slipping by 11 per cent on the year.

As of the end of June this year, UBS's Common Equity Tier 1 capital ratio was 13.3 per cent.

Among further details about wealth management, UBS said that double-digit pre-tax profit growth for Asia-Pacific and Europe, and “solid” Swiss growth, more than offset challenges in the Americas. In the latter case, invested assets fell at the start of the first part of the second quarter. Those assets affect the billing reference levels of business. Lower US interest rates also hit business in the Americas.

“Continued high levels of client activity and greater market volatility led to an 8 per cent improvement in transaction-based income, with net interest income up 6 per cent on higher lending and deposit revenues, and despite further pressure on interest rates. Recurring net fee income decreased by 8 per cent, mostly reflecting lower invested assets at the beginning of the quarter and margin compression from mandate product shifts and lower fund fees,” UBS said.

Net new money was $9 billion, and positive across all regions.

Outlook
Commenting on the business outlook and impact of COVID-19, UBS said: “Given the continued uncertainty related to the pandemic, it is reasonable to expect elevated group credit loss expenses in the second half of 2020, but below those seen in the first half of the year.”

“The majority of our credit exposures are either with our Global Wealth Management clients or in Switzerland, and are of high quality. Switzerland's effective crisis management measures will help it withstand this shock to the economy. Higher market levels at the start of the quarter will benefit recurring fee income. Our ongoing actions to improve our net interest income, including loan growth, should partly offset higher liquidity costs incurred to respond to the current environment, in addition to US dollar interest rate headwinds,” it continued.