UBS falls short in 'uncertain' second quarter

UBS reported a disappointing second quarter on Tuesday, with a souring economic outlook hurting its wealth management and investment banking and resulting in earnings coming in short of expectations.

The Swiss banking giant said its net profit rose 5% year-on-year for the three months to June, to $2.1bn.

Despite the growth, it was still well short of the 19.8% improvement to $2.4bn anticipated by analysts polled by UBS.

UBS said its investment banking operations saw revenue decline by 14% to $2.1bn, while its largest division - wealth management - recorded revenue of $4.7bn, slipping from $4.8bn.

The company blamed the fall on lower transaction fee revenue, while asset management outflows totalled $12bn.

It confirmed it would continue its previously-announced share buybacks.

“The second quarter was one of the most challenging periods for investors in the last 10 years,” said group chief executive officer Ralph Hamers.

“Inflation continues to be high, the war in Ukraine is ongoing, as are strict Covid policies in parts of Asia.

“In these uncertain times, our clients rely on our powerful ecosystem to navigate markets and invest for the long term.”

Hamers said institutional clients remained “active” on the back of high volatility, with the bank supporting them with advice and execution while handling “very high” volumes.

At the same time, private clients stayed on the sidelines with a focus on deposits and loan offerings, both of which Hamers said saw “particularly robust” year-on-year growth in the Americas.

“Our headline numbers for the quarter were strong.

“Our underlying performance reflected a good result in an environment with lower asset levels, higher volatility and increasing rates.”

That, Ralph Hamers said, showed the “strength” of the company’s strategy and “globally diversified” business model.

“Heading into the second half of the year, we are well positioned to support clients in an operating environment that remains uncertain.”

The bank’s Tuesday report kicked off earnings season for a number of banks in Europe.

In recent weeks, several American institutions reported disappointment in their second quarters, with both Morgan Stanley and JP Morgan Chase flagging significant falls in revenue from investment banking activities.

At 1200 CEST (1100 BST), shares in UBS Group were down 6.31% in Zurich, at CHF 15.14.

Reporting by Josh White at Sharecast.com.