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UBS misses second-quarter earnings expectations; CEO cites ‘unsure instances’

UBS on Tuesday missed expectations for the second quarter of 2022 as its wealth administration and funding banking divisions noticed falling shopper exercise on the again of the worldwide market downturn.

The Swiss financial institution posted a web revenue attributable to shareholders of $2.108 billion, beneath analyst expectations aggregated by the corporate of $2.403 billion.

It marks a 5% rise from the $2 billion reported during the same period last year, when the flagship wealth administration enterprise noticed a major windfall from rich traders, and follows a powerful first-quarter that noticed the group post a net profit of $2.136 billion.

“The second quarter was one of the difficult intervals for traders within the final 10 years. Inflation continues to be excessive, the warfare in Ukraine is ongoing, as are strict Covid insurance policies in components of Asia,” UBS CEO Ralph Hamers stated in an announcement. “In these unsure instances, our purchasers depend on our highly effective ecosystem to navigate markets and make investments for the long run.”

Different highlights for the quarter:

  • Complete revenues hit $8.917 billion, in comparison with $8.897 billion for a similar interval final 12 months.
  • Return on tangible fairness stood at 16.4%, versus 15.4% a 12 months in the past.
  • CET 1 capital ratio, a measure of financial institution solvency, reached 14.2% versus 14.5% within the second quarter of 2021.

Funding banking revenues slide

Funding banking revenues got here in at $2.094 billion, down 14% from the identical interval final 12 months.

In its report, the financial institution highlighted a $1.121 billion fall in web price and fee revenue, primarily reflecting a “lower in underwriting charges, notably in Fairness Capital Markets, and a lower in web brokerage charges because of decrease ranges of shopper exercise in World Wealth Administration and the Funding Financial institution.”

“Funding fund charges decreased, reflecting destructive market efficiency and decrease efficiency charges, and revenues from merger and acquisition transactions additionally decreased,” the report added.

Though the wealth administration enterprise took a success from a broad decline in markets, Hamers stated this had been largely offset by rising rates of interest, with the U.S. Federal Reserve embarking on an aggressive climbing cycle in a bid to reel in inflation.

“On our recurring revenues, you see a lower due to the extent of the markets having gone down. You see on the transaction revenues a lower as effectively as a result of purchasers have been sidelining their investments,” he advised CNBC’s Geoff Cutmore on Tuesday.

“Nevertheless, you see a 24% uptick in web curiosity revenue on the again of rising charges, and as a consequence of that, the general revenues within the wealth administration enterprise for the quarter have been solely -2% in very troublesome circumstances.”

The emblem of Swiss banking large UBS.

Fabrice Coffrini | AFP | Getty Photos

As market declines accelerated throughout fairness and stuck revenue within the second quarter, the financial institution’s wealth administration division noticed muted web new fee-generating property of round $400 million globally, although inflows have been over $3 billion web optimistic in Asia-Pacific.

“On the one facet, we noticed already for a few quarters the development of purchasers being decrease on transactions, holding again on transactions,” Hamers advised CNBC on Tuesday.

“On the opposite facet, we have seen particularly this quarter, actually large web new fee-generating property coming by way of – $3.3 billion in Asia-Pacific – which mainly exhibits you that purchasers are transferring away from transactions into mandate enterprise, and that is been at all times a part of our technique.”

The asset administration enterprise additionally noticed $12 billion of outflows, primarily from equities.

Hamers stated he was a bit of extra optimistic on the macroeconomic and market outlook in Asia towards the tip of the third quarter, when extra readability has been established in regards to the political scenario in China, that means a firming up of financial insurance policies and the potential of additional lifting of Covid-19 restrictions.

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