UBS profit beats forecasts

Switzerland’s biggest bank posts €800 million net income

UBS, Switzerland’s biggest bank, reported first-quarter earnings that beat analyst estimates. Photo: Bloomberg

UBS, Switzerland’s biggest bank, reported first-quarter earnings that beat analyst estimates. Photo: Bloomberg

 

UBS, Switzerland’s biggest bank, reported first-quarter earnings that beat analyst estimates on higher revenues at the investment bank and in wealth management.

Net income fell to 988 million Swiss francs (€800 million) from 1.04 billion francs a year earlier, the Zurich-based bank said in a statement today.

That surpassed the 412.3 million- franc mean estimate of nine analysts. Chief Executive Officer Sergio Ermotti announced 10,000 job cuts and the exit of most debt-trading businesses at the investment bank last year to concentrate UBS on money management and boost profitability.

UBS is trading at a higher price relative to estimated earnings and book value than Credit Suisse as investors back the company’s focus on wealth management.

UBS has risen 20 per cent to 15.71 francs in Swiss trading over the past six months, compared with a 13 per cent gain in the Bloomberg Europe Banks and Financial Services Index of 40 companies.

“It’s too early to talk about vindication or to declare victory, but I think I’m extremely pleased with the progress we made so far in executing our strategy,” Mr Ermotti said in an interview.

“It’s working. I’m very pleased to see that clients are responding well to the strategy.”

The investment bank posted a 92 per cent gain in pretax profit to 977 million francs, beating the average analysts’ estimate of 321 million francs.

The unit, which aims for an annual pretax return on equity of more than 15 percent, reported that measure of profitability at 49.5 per cent for the quarter, up from 17 per cent a year earlier.

“The strategy of the new investment bank works with two- thirds less capital allocation than a year ago,” Mr Ermotti said.

Revenue at the securities unit rose 21 per cent from a year earlier to 2.79 billion francs, helped by gains in equities and equity capital markets, which rose 17 per cent to 1.17 billion francs and more than doubled to 503 million francs, respectively.

Equities revenue included a 55 million-franc gain from the sale of a part of UBS’s former proprietary stock- trading desk, which the bank closed last year, while equity capital markets business benefitted from a large private transaction, the bank said.

Earnings in wealth management fell 28 per cent to 664 million francs on higher costs, after profit a year ago benefitted from a reduction in expenses related to changes in the company’s Swiss pension plan.

The division attracted 15 billion francs in net new money from investors in the quarter, the biggest amount since 2007.

The gross margin, a measure of how much revenue UBS makes on assets, rebounded by 6 basis points from the last quarter of 2012 to 91 basis points.

Bloomberg