Wealth management drives UBS profits soaring
UBS reported a surge in profits in the second quarter as the relaxation of restrictions on the spring pandemic helped boost the business of its wealth management division.
Net profit for the three months to the end of June climbed to US$2 billion, an increase of 63% year-on-year, easily exceeding analysts’ forecast of US$1.35 billion.
“The momentum is on our side, and our strategic choices and initiatives are paying off,” CEO Ralph Hammers said in a statement on Tuesday.
He added: “Our growth in the second quarter benefited from the relationships we built and strengthened throughout the pandemic.”
Since taking over in November last year, Hamers has seen UBS benefit from the bank’s focus on wealth management. The bank’s investment in assets on behalf of clients through its global wealth management and asset management divisions increased by 4% during the quarter to reach US$4.4 trillion.
UBS’ flagship global wealth management division contributed $1.3 billion in pre-tax profits, an increase of 47% year-on-year, as wealthy customers shifted their investments to more complex and profitable products.
The profit of the investment banking business increased 9% to US$668 million, and the increase in M&A advisory fees offset the impact of the decline in global market and prime brokerage revenue.
Personal and corporate banking profits have doubled from a year ago to $456 million. The bank said that with the lifting of restrictions related to the pandemic, the recovery in consumer spending is the reason for the surge in credit card and foreign exchange income.
Although UBS’s hedge fund business revenue plummeted and performance fees fell 46% in the quarter, the asset management department reported a profit of US$255 million, an increase of 62%, thanks to its global equity product valuation and Performance fees increased.
The bank also strengthened its balance sheet during the pandemic. Its core equity Tier 1 capital ratio-a key measure of financial strength-rose to 14.5%, higher than the bank’s target of 13%.
The bank said that despite this, there are still uncertainties in several imminent court cases.
So far, UBS has set aside US$2 billion to meet expected legal expenses. The bank said it expects to appeal the French court’s ruling on tax fraud in September. The Belgian authorities are also investigating a parallel case. UBS is facing a case related to the sale of US mortgage-backed securities and Madoff investment fraud.