UBS exceeded expectations in the third quarter despite a decline in profit from a year earlier. The bank didn’t however meet its own targets.
UBS, Switzerland’s largest bank, had net income of $1.05 billion in the third quarter, down 16 percent from the same period a year ago, according to a statement released on Tuesday. Analysts had expected profit of $971 million.
Zurich-based UBS didn’t meet its own expectations with reported return on capital (CET1) at 12.1 percent, below the target rate of 15 percent. This target will be hard to achieve for the full year.
Further Cuts Expected
«We delivered solid results generating attractive returns, considering the market conditions,» said UBS Chief Executive Sergio Ermotti in the statement. «We continue to take actions to grow profitability and further capitalize on the strengths of our diversified franchise, delivering long-term value for our clients and shareholders.»
The measures will probably include further cost cuts, the report suggests. In the first half, UBS had announced cuts amounting to a total of $300 million.
Record Assets Under Management
The most important division within UBS – the global wealth management unit – improved its quarterly profit thanks to client activity and lower restructuring costs. The cost-income ratio, however, was below the rate the bank aspires to. UBS said it had helped clients meet their targets in challenging markets.
Net new assets was 2.5 percent, within the target range of the bank. UBS Wealth Management received $15.7 billion in the quarter. Assets under management reached a record of $2.5 trillion. The division had a pre-tax profit of $894 million, above expectations.
Challenges Awaiting Iqbal Khan
It will be down to Iqbal Khan, no co-chief of the unit alongside Tom Naratil, to generate even more profit more the record-high assets under management. At previous employer Credit Suisse, Khan had managed to improve the net interest income in wealth management. UBS warned in today’s statement that the current low interest environment would pare interest income compared with last year.
The investment bank had an adverse development in the three-month period, with revenue declining across the division. Pretax profit of $172 million was substantially lower than expectations.
Investment Bank Disappointment
Piero Novelli and Rob Karofsky, the co-heads of the investment bank, are planning a reorganization of the division. According to the plan, the bank will better meet client needs and have a lower cost base.
The – costly – measures envisaged will start taking effect in October. The third quarter had no restructuring costs included, which are likely to adversely affect the fourth quarter.
Asia Slowdown
Whilst Asia continued to be the engine of growth for UBS's wealth management arm – net new assets from the region totaled $10.9 billion out of the global total of $16 billion – client activities slowed. The region was attributed as a primary driver of reduced transaction-based income which globally totaled nearly $2.3 billion, a $74 million year-on-year decrease.
Asset management performance was also flat with invested assets in the region dipping 4 percent year-on-year to reach $147 billion.
