In 2020, the year of the pandemic UBS Europe’s profits more than doubled, showing that the break with the past under the unit’s head, Christine Novakovic, is bearing fruit.
«I really enjoy tackling difficult issues where you have to completely rethink things, take a different approach or even restructure,» Christine Novakovic recently told finews.com.
UBS Europe would certainly have been to her taste when she took the helm in 2019 on top of her role as head of European Asset Management as its profits were sinking like a stone.
Beating 2020 Targets
At year later «Christl», as everyone calls her at UBS, had turned things around. Frankfurt-based UBS Europe doubled its annual net profit to 111.1 million euros ($131.4 million) from 46.7 million, its 2020 financial report shows. The pre-tax profit was 176 million euros, up over 38 percent.
Private Banking in the 11 European country units provided the lion’s share of the pre-tax profit at 99 million euros. Investment banking, mainly carried out in London and Frankfurt, accounted for 86 million euros, below expectations. On the other hand the funds business delivered around 50 million euros in pre-tax profit, more than two and a half times the target.
Total assets under management rose by 5.1 billion euros to 149.5 billion, above the upper end of the target range, the report said.
Flying Dutchmen
Another bright spot in 2020 was that in its most important European market, Germany, UBS finally turned a corner. After decades of losses it made a profit of 30.6 million euros.
Of the 11 national markets UBS Europe serves there were only losses in the U.K, France, Poland and Spain, an improvement on 2019. The Dutch unit made the largest profit of 76.4 million euros.
Buying and Selling
UBS Austrian private bank, despite making a profit of 6.6 million euros, was sold off to Liechtenstein-based bank LGT .The transaction should close in the third quarter.
Rumors of a sale have swirled around the Spanish unit, but UBS has been very tight-lipped about this.
However it is no secret that UBS is withdrawing from unprofitable European markets and potentially using the proceeds of any sales for acquisitions in the region.
Under its three-year plan for 2021 to 2023, UBS Europe is making staying profitable despite the turbulent economic backdrop its top priority. The bank is forecasting a fall in pre-tax profit in 2021 followed by a sharp rise in 2022.
This is down to expected one-off effect such as the closure of the U.K. office because of Brexit which will hit the investment banking result.
Take-off in Core Business in 2022
A slightly lower profit than in 2020 is expected in the core Global Wealth Management business in 2021, but UBS Europe is forecasting sharp rises in 2022 and 2023.
UBS Europe will also have to deal with legacy issues over the next few years. There are still compensation cases outstanding against the bank over the collapse of the Bernie Madoff Ponzi scheme back in 2008. UBS Europe is also involved in civil cases in other European countries and has set aside 38.8 million euros for legal risks and compensation claims.
Prosecutions in Italy
On top of that there are prosecutions hanging over UBS Europe. In 2019 the Italian central bank opened a money-laundering case against the UBS branch and a subsidiary there. The result was a fine of 1.48 million euros for the bank and 30,000 euros for the subsidiary. UBS has appealed the fine against its branch.
Four former and a current employees of the bank are also being prosecuted in Italy in a separate case.
It looks like Novakovic, who is described as someone brought in to do the dirty work and herself says she finds «finessing the business model intellectually very stimulating», won’t get bored any time soon.
