UBS Group AG reported weaker-than-expected profit in the second quarter, as the global market sell-off kept wealthy clients on the sidelines and institutional investors pulled funds.
The Zurich-based bank reported net income of US$2.1 billion, compared with analyst estimates of US$2.4 billion. The quarter was affected by lower revenues at the key wealth management business, outflows in asset management and investment banking results that also trailed expectations.
“We saw private clients, given all the uncertainty, sidelining their money and waiting for things to clear up,” UBS chief executive officer Ralph Hamers said in an interview with Bloomberg Television.
Photo: Bloomberg
Earlier, he called the second quarter “one of most challenging periods for investors in the last 10 years.”
The Swiss bank posted pre-tax profit for its wealth management business of US$1.16 billion, weighed down by a slump in client trading activity particularly in the Americas and Asia.
While Asia posted improved inflows that could signal an activity rebound ahead, overall net new fee-generating assets were muted.
The asset management division posted US$12.1 billion in outflows as investors exited equities during the turbulent quarter. The unit’s revenue included a gain from the sale of UBS stake in a Japanese real-estate venture partly held with Mitsubishi Corp.
UBS’ investment bank, which is heavily geared toward equities, posted profit before tax of US$410 million in the second quarter, compared with analyst estimates for income of about US$511 million. Trading revenue was up 4 percent, after the effects of last year’s default of Archegos Capital Management LLC were accounted for.
UBS also cited lower compensation costs at the investment bank, as the market declines cool what had been a fierce bidding contest for talent.
UBS confirmed its plans to buy back about US$5 billion in shares this year, with more than US$3 billion already completed in the first half.
The lender also signaled the potential for higher litigation provisions relating to a long-running French tax evasion case, and said that in general, the bank continues to be “exposed to a number of significant claims and regulatory matters.”
Earlier this year, UBS said it halted all new business in Russia, where it had about 70 employees, and is in the process of reducing its exposure to the region.
Since then, the bank disclosed a US$100 million hit from Russia-related transaction settlements in the first quarter and said it could rise in the second quarter.
After surpassing the US$3 trillion mark in assets under management, the Swiss bank under Hamers is counting on greater use of digital technology to boost cost savings and increase business with the world’s wealthy.
UBS in January agreed to buy US robo-adviser Wealthfront Software LLC and has launched mobile applications in Europe and Asia, seeking to encourage clients to engage on investments in the same way they browse Netflix for movies.
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