UBS' quarterly profit edged higher after the Swiss kept spending in check. Both its flagship wealth unit and investment bank recorded lower profits.
Zurich-based UBS' net profit for the second quarter edged 1 percent higher to $1.39 billion, the bank said in a statement on Tuesday. Revenue eased one percent, which the Swiss bank handily offset by slashing spending by more than $165 million, or 3 percent.
«Our goals remain unchanged: to deliver sustainable and profitable long-term growth while investing in our businesses and providing attractive shareholder returns,» CEO Sergio Ermotti said. He is behind a wealth-centered strategy that hones in on the super-rich, or those with more than $50 million.
But profit at the Swiss bank's flagship wealth unit dropped by 17 percent. Wealthy Asian and U.S. clients shunned trading and inked fewer loans, leading to a drop in revenue. UBS also won fewer fees because clients the overall level of assets dropped.
Softer Securities Unit
At its investment bank, profit before tax dropped 20 percent. UBS said favorable showings from its dealmaking arm, especially advisory and equity capital markets, helped. By contrast, revenue from equities, foreign exchange trading, rates, and credit softened.
UBS' is coming off a 27 percent tumble in the first quarter – which it termed its toughest in years. Shareholders haven't been enthusiastic about its wealth strategy following a mega-merger last year. Crosstown rival Credit Suisse, which reports the quarter on June 30, won more investor plaudits after emerging from a three-year revamp similar to UBS'.
Better «Bad Bank»
UBS' result was smoothed by a favorable «corporate center,» where shared spending for potential litigation dropped. The unit also benefited from lower spending on a «bad bank» unit for winding down its to-be-disposed assets, as well as from a «accounting asymmetries and hedge accounting ineffectiveness.»
The bank's wealth arm is suffering under record-low or negative rates: net interest income dropped 7 percent. In the U.S., clients pulled $8.3 billion, which weighed on the wider unit's net new money showing.
Cautiously Upbeat
The second quarter follows two poor ones from UBS, and the bank struck a more upbeat tone for the rest of the year. Policymakers in the U.S. as well as Switzerland may be poised for more expansionary monetary measures; while this is broadly good economic news, it is unfavorable for banks, which have to live with lower interest income.
«An improvement in investor sentiment and higher market volatility could help to offset the typical third quarter seasonality,». Political hotspots around the world as well as tensions geopolitically remain a threat to its business, the wealth manager said.
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