As expected, major bank UBS suffered from tough market conditions in the third quarter and earned significantly less than a year earlier. However, market expectations were clearly exceeded.
As a result, the largest Swiss bank earned US$1.73 billion in the summer quarter, according to a statement released on Tuesday. That’s almost a quarter less than in the same period a year ago, when the largest Swiss bank earned more than 2 billion.
UBS before taxes posted a profit of $2.32 billion, down almost 20 percent. Analysts’ forecasts for the reporting period, according to the AWP consensus, were significantly exceeded in some cases at all levels and also at the divisional level.
Customer’s war anxiety
In the announcement, the bank talks about “a good outcome in a difficult environment.” But CEO Ralph Hamers said in a statement that customers are still worried in the wake of persistently high inflation, high energy prices, the war and the pandemic in Ukraine.
In July-September, earnings decreased by about 10 percent compared to the previous year, reaching $8.24 billion. With a slight decrease in costs (-6 percent), the ratio of costs to income – the cost/income ratio, which is important for banks – declined to 71.8 percent. However, the bank was still within the 70 to 73 percent target range it had set itself.
Swiss bank doing well
All segments’ earnings fell amid uncertainty, although very small in the core segments of global wealth management (-4 percent) and Swiss business (-2 percent). Investment banking (-47%) and wealth management (-34%) suffered greatly from the challenging conditions.
Assets under management continued to decline due to the almost global adverse events in financial markets. Overall, the bank still managed $3,706 billion at the end of September—$200 billion less than at the end of June. On the other hand, UBS was able to continue acquiring new funds despite the general reluctance in the financial markets.
In its core business, global wealth management, UBS generated a net income of $17.1 billion, referred to as fee-earning wealth. Asset management also saw a net inflow of 17.9 billion.
As usual, CEO Hamers is not very clear about the course of the year ahead. However, he is confident that UBS can continue to generate “attractive and sustainable returns.” He said the person will remain “disciplined” in the fourth quarter in terms of risk management and cost efficiency.
The bank also plans to buy back more than 5.5 billion shares as a whole in 2022, but according to the information, more than 5 billion of the treasury shares have already been bought.