UBS Europe was again in good form last year thanks to boss Christine Novakovic. However, equity market volatility and investor uncertainty are now posing challenges for the Frankfurt-based institution.
«Christl delivers,» ran a headline from finews.com a year ago. Christine Novakovic, or Christl, as she is called within the bank, delivered a doubling of net profits to 111 million euros in 2020 as head of UBS Europe. Last year she was able to increase that result by roughly a third to 141 million euros, as the 2021 results for the business showed.
Parent Company Windfall
Last year, pre-tax profit came to 238 million euros, compared with 176 million euros in 2020, and doesn't account for the proceeds from the sale of its Austrian business to Liechtenstein-based LGT. The balance sheet profit of 613 million euros was transferred in full to the Swiss parent company by the European bank in Frankfurt. This came as a welcome boost after years of losses in European onshore business.
Since the native of South Tyrol took over in 2019, the profit trend at European bank has been upward. The most recent result was driven by the investment bank, which posted a pre-tax profit of 134 million euros. The core asset management business earned 120 million euros when adjusted for the sale of the Austria unit, while the fund business contributed 38 million euros to the institution's pre-tax profit.
Investment Bank Shines
Like the company's Swiss parent, the European subsidiary benefited from an exceptionally favorable environment for the industry, with booming stock markets melding with a pent-up «deal flow» in investment banking. But this year is presenting a more challenging playing field, a spokesman told finewes.com. «Even within UBS Europe, we can't detach ourselves from global market trends and the current volatility and uncertainty on the investor side.» In that respect, the business has performed much like that of UBS Group, he added.
Last July, Switzerland's largest bank reported a second-quarter profit supported by special items while clients remained largely inactive.
Double-Digit Growth
For last year as a whole, the European bank reported double-digit growth, with invested assets increasing 14 percent from 2020, driven mainly in Luxembourg and Germany with 10 and 11 percent growth, respectively. Total assets under management climbed 11 percent year on year to 165.8 billion euros. These results make a strong case for the position of the European market within the group as UBS CEO Ralph Hamers shifts the main focus in wealth management from the American and Asian markets to Europe.
UBS divested its Austrian business and Spanish private banking unit last year. In wealth management, UBS Europe, excluding its activities in Switzerland, remains active in nine countries, all of which, except Germany (due to special charges) and Denmark, delivered revenues to the European Bank last year.
No Danish Exit
Exiting Denmark is out of the question for the institute, the spokesman emphasized. «We are very satisfied with the general business development there and there are no plans to sell the business.» UBS operates a small advisory office in Denmark, with all businesses managed from Luxembourg and Frankfurt.
The European bank exceeded the targets it had set itself, in some cases significantly. It remains to be seen whether this will be as smooth sailing within the three-year plan running through 2024. This should also ensure that boss Novakovic does not get bored with her job just yet. As she told finews.com as recently as the summer of 2021: «I find the gradual increase in profitability and the fine-tuning of the business model intellectually very exciting.»
