By Brenna Hughes Neghaiwi
ZURICH (Reuters) – UBS (S:) on Tuesday posted a 99% soar in third-quarter revenue as heavy turnover in international markets helped the financial institution to a robust efficiency in funding banking and an surprising rise in wealth administration earnings.
In Chief Govt Sergio Ermotti’s final month on the helm, web revenue for the world’s largest wealth supervisor climbed to $2.1 billion for July-September, handily beating expectations for $1.557 billion.
“Our third quarter outcomes proceed to exhibit that our technique is differentiating us,” Ermotti, who will likely be changed in November by former ING (AS:) head Ralph Hamers, stated in an announcement.
“UBS has all of the choices open to write down one other profitable chapter of its historical past below Ralph’s management.”
Shares opened 2.2% greater, additionally bolstered by 2021 buyback hopes.
Funding banking noticed earnings greater than triple through the quarter because of a spike in buying and selling and fairness capital markets work which greater than offset a fall for its advisory enterprise.
Income in each its equities and international change, charges and credit score models was up simply over 40% in comparison with a yr earlier.
Asset administration noticed earnings develop six instances from a yr in the past.
Regardless of a consumer shift into lower-margin funds which put stress on recurring charges, wealth administration posted an 18% rise in pre-tax revenue because of excessive ranges of consumer transactions and $10 billion in web new loans. Analysts had anticipated earnings to fall within the financial institution’s core division.
Belongings below administration within the wealth division rose to an all-time excessive of $2.754 trillion, whereas web new cash fell to $1.four billion following a $four billion withdrawal by a single consumer within the Europe, Center East and Africa area.
UBS stated it has to this point accrued $1 billion for a money dividend to be paid out subsequent yr, and has additionally put aside $1.5 billion in capital reserves for potential share repurchases.
The sharp revenue rise for Europe’s first main lender to report third-quarter outcomes follows a combined efficiency for large U.S. banks that noticed these targeted on buying and selling clocking large positive factors whereas retail banks took successful from the pandemic.
NOT WITHOUT IRONY
The sturdy displaying by UBS’ funding financial institution marks an ironic sendoff for Ermotti, who throughout his near-decade on the helm radically shrank the division and ramped up its give attention to serving the world’s wealthy.
He additionally wound down most of UBS’ fastened earnings enterprise, a supply of risky earnings and the largest buying and selling fraud in British historical past, to give attention to wealth administration in a technique quickly adopted by cross-town rival Credit score Suisse (S:).
However, as Ermotti palms over to Hamers, wealth administration is contending with fierce margin stress in addition to rising international competitors from powerhouses together with U.S. big Morgan Stanley (N:).
Morgan Stanley final week crushed Wall Road revenue estimates, with wealth administration revenues up 7%, whereas smaller Swiss wealth administration rival Julius Baer (S:) on Monday beat expectations on stronger consumer inflows.
Up to now this yr, UBS’ shares have dropped round 12%, higher than the 25% plus falls skilled by Credit score Suisse and JPMorgan (N:) however underperforming Morgan Stanley inventory which is up round half a proportion level.
Since Ermotti took the reins in September 2011, the financial institution’s inventory has seen a complete 10% value achieve. However its worth has greater than halved from a peak above 22 francs per share in 2015 below the burden of unfavorable Swiss rates of interest and geopolitical pressures.
Over that very same interval, Credit score Suisse shares have halved in worth, whereas JPMorgan (N:) and Morgan Stanley shares have every greater than tripled, reflecting the stronger place of Wall Road lenders within the wake of the worldwide monetary disaster.