UBS Group AG yesterday posted a US$774 million hit from the implosion of Archegos Capital Management LLC and said it plans to review its risk procedures after it joined Morgan Stanley in surprising investors over the size of the impact from the collapse of the US family office.
Even with the Archegos hit, UBS reported better-than-expected first-quarter profit of US$1.82 billion as wealth management income climbed.
Switzerland’s largest bank had remained quiet on the collapse of Bill Hwang’s family office for weeks, even as its biggest rival, Credit Suisse Group AG, unveiled a US$5.5 billion hit and Japan-based Nomura Holdings Inc confirmed losses of US$2.3 billion for fiscal 2020-2021.
Photo: Reuters
While Goldman Sachs Group Inc, JPMorgan Chase & Co and Wells Fargo & Co all limited or avoided hits, Morgan Stanley was criticized by some investors and analysts for revealing a US$911 million loss during its earnings.
The “Archegos losses have taken the shine of these results,” JPMorgan analysts Kian Abouhossein and Amit Ranjan wrote in a note.
The turmoil at Credit Suisse had afforded UBS chief executive officer Ralph Hamers a period of relative calm, even as the bank fights a US$4.5 billion penalty in France and the new CEO himself saw his short tenure complicated by a Dutch probe into his role in a money-laundering case at his former employer ING Groep NV.
Hamers said that UBS expects an additional US$87 million trading loss in the second quarter from exiting its remaining Archegos exposure this month.
“We are all clearly disappointed and are taking this very seriously,” he said. “A detailed review of our relevant risk management processes is under way and appropriate measures are being put in place to avoid such situations in the future.”
Hamers, speaking in a Bloomberg Television interview, said that the bank would be seeking more transparency from family offices and other big clients at the wealth management division, although there are no plans to cut back the prime brokerage business as Credit Suisse plans to do.
Some lenders were blindsided by the positions that Hwang had accumulated before the meltdown.
The Archegos impact also overshadowed a strong quarter at the bank’s key wealth management business, where UBS benefited from higher average fee-generating assets and transaction fees, compensating for a decline in net interest income.
The unit, led by Iqbal Khan and Tom Naratil, posted better-than-expected pretax profit of US$1.41 billion, the bank said in a statement.
It gave a mixed outlook for the second quarter, warning of lower seasonal activity, while saying that higher asset prices should have a positive effect on recurring fee income.
At the investment bank, the Archegos hit drove down equities revenue by 20 percent, although it would have gained 48 percent excluding the hit.
Fixed-income trading declined about 37 percent.
Overall, UBS reported net income of US$1.82 billion compared with its estimate of US$1.63 billion, and wealth management pretax profit of US$1.4 billion, compared with its estimate of US$1.19 billion.
EXTRATERRITORIAL REACH: China extended its legal jurisdiction to ban some dual-use goods of Chinese origin from being sold to the US, even by third countries Beijing has set out to extend its domestic laws across international borders with a ban on selling some goods to the US that applies to companies both inside and outside China. The new export control rules are China’s first attempt to replicate the extraterritorial reach of US and European sanctions by covering Chinese products or goods with Chinese parts in them. In an announcement this week, China declared it is banning the sale of dual-use items to the US military and also the export to the US of materials such as gallium and germanium. Companies and people overseas would be subject to
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) founder Morris Chang (張忠謀) yesterday said that Intel Corp would find itself in the same predicament as it did four years ago if its board does not come up with a core business strategy. Chang made the remarks in response to reporters’ questions about the ailing US chipmaker, once an archrival of TSMC, during a news conference in Taipei for the launch of the second volume of his autobiography. Intel unexpectedly announced the immediate retirement of former chief executive officer Pat Gelsinger last week, ending his nearly four-year tenure and ending his attempts to revive the
WORLD DOMINATION: TSMC’s lead over second-placed Samsung has grown as the latter faces increased Chinese competition and the end of clients’ product life cycles Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) retained the No. 1 title in the global pure-play wafer foundry business in the third quarter of this year, seeing its market share growing to 64.9 percent to leave South Korea’s Samsung Electronics Co, the No. 2 supplier, further behind, Taipei-based TrendForce Corp (集邦科技) said in a report. TSMC posted US$23.53 billion in sales in the July-September period, up 13.0 percent from a quarter earlier, which boosted its market share to 64.9 percent, up from 62.3 percent in the second quarter, the report issued on Monday last week showed. TSMC benefited from the debut of flagship
TENSE TIMES: Formosa Plastics sees uncertainty surrounding the incoming Trump administration in the US, geopolitical tensions and China’s faltering economy Formosa Plastics Group (台塑集團), Taiwan’s largest industrial conglomerate, yesterday posted overall revenue of NT$118.61 billion (US$3.66 billion) for last month, marking a 7.2 percent rise from October, but a 2.5 percent fall from one year earlier. The group has mixed views about its business outlook for the current quarter and beyond, as uncertainty builds over the US power transition and geopolitical tensions. Formosa Plastics Corp (台灣塑膠), a vertically integrated supplier of plastic resins and petrochemicals, reported a monthly uptick of 15.3 percent in its revenue to NT$18.15 billion, as Typhoon Kong-rey postponed partial shipments slated for October and last month, it said. The
RSS