In 2022, Union Bancaire Privée paid high integration costs for acquisitions and saw a record outflow of institutional client funds. It still turned a profit, but how?

Even in a difficult financial year with plummeting stock prices, Swiss-based Union Banciare Privée (UBP) posted a 4.5 percent profit increase to 210.4 million francs ($228.8 million) in 2022, the firm announced Monday.

The financial market corrections and negative exchange rate effects from the Swiss franc's strength, especially against the euro and the British pound, affected UBP's assets under management (AuM) last year. AuM fell to 140.4 billion francs at the end of December, down 12.5 percent from 160.4 billion at the end of 2021, as finews.com reported.

Institutional Asset Outflows

Net new assets amounted to 0.9 billion Swiss francs mainly due to the integration of Danske Bank International and funds brought in by private clients. This helped offset outflows which were mainly from institutional clients.

Operating income increased by 7.0 percent year-on-year to 1.21 billion francs, a direct result of the increased net interest margin following the interest rate increases by the central banks.

Similarly, the 16 million franc increase in foreign exchange business income helped offset a 6.2 percent income decline from commissions and fees, in the wake of a slowdown of private client trading activity.

Substantial Integration Costs

Operating expenses increased year-on-year from 754.5 million Swiss francs to 826.6 million Swiss francs, a 9.6 percent increase attributable to costs associated with the acquisitions of Millennium BCP in November 2021, and Danske Bank International in January of last year.

Costs for recruiting new teams for target markets of Eastern Europe, the Middle East, and Asia also made an impact. The bank's cost/income ratio increased to 68.1 percent from 66.5 percent at the end of 2021.

Minority Stake Sale

UBP generated an extraordinary gain of 29.3 million francs from the sale of a minority stake. The amount was not booked as consolidated profit but rather allocated to reserves for general banking risks, valuation adjustments, and other provisions.

UBP Chief Executive Guy de Picciotto said for 2023, the bank has to prepare for another «unpredictable year,» although current headwinds are more of a cyclical than structural nature. UBP's focus will be on risk management and adapting investment offerings to take advantage of new developments in the markets. 

Talent Search

He added the bank will continue to invest in recruiting new talent to deepen expertise to better serve private and institutional clients.