UBS quarterly profit worse than thought

Zurich — Swiss bank UBS posted a smaller-than-expected rise in second-quarter net profit, on Tuesday, as its investment banking and wealth management businesses struggled in tough markets.

UBS kicks off a round of earnings by major banks across Europe, where analysts are watching for signs that a weaker economy, higher interest rates and the war in Ukraine are weighing on their operations and outlooks.

Profit in the three months ended June rose 5% to $2.1bn. That compared with $2bn a year earlier and lagged expectations for a 19.8% rise to $2.4bn in a poll of 19 analysts compiled by the bank.

“The second quarter was one of the most challenging periods for investors in the last 10 years,” CEO Ralph Hamers said in a statement. He said the operating environment in the second half of the year “remains uncertain”.

UBS's performance comes after some US rivals earned less money overall in the quarter due to drops in dealmaking and the selling of investment products. JPMorgan Chase and Morgan Stanley both reported that investment banking revenues more than halved.

Earnings at the Zurich-based bank were helped by the sale of a real estate joint venture in Japan that yielded a one-off gain of more than $800m.

UBS shares were indicated to open 1.2% lower on Tuesday. They are down 1.6% so far this year, outperforming a 22% fall in a broad index of European banks.

Its investment banking business saw revenue fall 14% to $2.1bn from $2.5bn a year ago. Analysts had expected $2.3bn.

Advisory revenue was down 30% and capital markets revenue down 71%, which the bank attributed in part to lower business for initial public offerings.

At its wealth management division, its biggest business, revenue was $4.7bn, down from $4.8bn a year ago and versus expectations for $4.8bn. UBS said the drop was mainly a result of lower income from transaction fees.

In recent months, the bank has signalled that its wealth management clients will continue to remain cautious due to geopolitical and macroeconomic uncertainties.

Earlier in July, UBS named Iqbal Khan the sole head of the Swiss bank's global wealth management division in an executive board reshuffle.

In a taste of challenges facing financial firms, Swiss wealth manager Julius Baer said on Monday it would freeze hiring for non relationship manager positions after higher costs and lower client activity triggered a 26% drop in first-half earnings.

UBS’s smaller cross-town rival Credit Suisse, which reports earnings on Wednesday, has warned of a likely second-quarter loss. Analysts on average expect the bank to report a loss of 60 US cents per share.

Reuters