UBS profit beats estimates but shares drop as it cuts financial targets

UBS slumped on Tuesday despite posting better-than-expected third-quarter profit, as the bank cut its financial targets on the back of new capital rules and a difficult macroeconomic backdrop.

Net profit for the third quarter came in at CHF2.1bn (£1.38bn), up from CHF762m (£500m) in the same period a year earlier and ahead of estimates of around CHF1.6bn. The figure was flattered by a CHF1.3bn net tax benefit, mainly related to a net upward revaluation of deferred taxes.

Chief executive officer Sergio P Ermotti said: "I’m pleased with the quarter. We stayed close to our clients in a very challenging environment. Disciplined execution and our diversified business model allowed us to deliver strong returns for our shareholders while continuing to invest in our future."

However, the banks said that in light of actual and forecasted changes in macroeconomic conditions and the announcement of a newly capital rules, UBS has revised some of its targets and expectations for the group and the business divisions for 2016 onwards.

UBS pushed back a targeted adjusted return on tangible equity of above 15% from 2016 to 2018 and upped its short to medium-term expectations for the cost/income ratio to between 65% and 75% from 60% to 70%.

At 1000 GMT, UBS shares were down 4.8% at CHF19.07.