The Swiss bank's profit rose, but it took a hit from Archegos' unwinding.
Zurich-based bank UBS's profit rose in the quarter to $1.82 billion from $1.56 billion, it said in a statement on Tuesday. While income rose by 13 percent on the year amid a surge in commissions and fees, a U.S. hedge fund client – likely Archegos – sliced $434 million off the Swiss bank's net profit.
The result comes as crosstown rival Credit Suisse is battered by dual scandals Archegos and Greensill. UBS' quarterly report comes six months into the tenure of CEO Ralph Hamers, whom the Swiss bank hired to revitalize itself. Instead, the Dutch banking executive's start in Zurich was marred by a criminal probe into his role in money laundering while at ING.
In a separate statement, UBS said it is promoting its technology head, Mike Dargan, to a wider role as chief digital and information officer, effective next month. Hamers said he plans for UBS to «evolve into a more client-focused, more agile, more digital firm.»
Surging Fees, Commissions
Operating income was up 10 percent at $8.71 billion due to the surge in fees and commissions, although it was also helped by a $296 million decline in credit loss expenses. Net interest income, however, offset that, easing $296 million.
Operating expenses were up 8 percent at $6.41 billion, mostly because of a $480 million increase in personnel costs. The cost-income ratio rose to 73.8 percent from 72.3 percent in the same period a year earlier.
Archegos Sparks Review
UBS suffered a $774 million hit in its prime brokerage, after it was forced to close out a «significant» portfolio of swaps after Archegos defaulted. UBS said it will take «very seriously» the loss from the hedge fund-family office client, which finews.com reported exclusively four weeks ago.
«A detailed review of our relevant risk management processes is underway and appropriate measures are being put in place to avoid such situations in the future,» said CEO Hamers, who separately made changes to his top management.
Spending Edges Higher
Operating income was up 10 percent at $8.71 billion due to the surge in fees and commissions, although it was also helped by a $296 million decline in credit loss expenses. Net interest income, however, offset that, easing $296 million.
Spending rose 8 percent at $6.41 billion, mostly because of a $480 million increase in personnel costs. The cost-income ratio rose to 73.8 percent from 72.3 percent in the same period a year earlier.
Cautiously Hopeful
After what is traditionally a strong start to the year for both investment banks and wealth managers, UBS expects client activity in the current quarter to recede, as it normally does.
It added that higher asset prices should favor recurring income in its private bank and asset management unit. «However, the continued uncertainty about the environment and economic recovery could affect both asset prices and client activity,» it said.
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