Switzerland’s largest bank UBS has weathered multiple first-quarter headwinds, turning its best first-quarter net profit in over a decade.
UBS reported Tuesday a net profit of $2.1 billion in the first quarter, exceeding expectations, showing the bank was able to steer a course through several challenges in the first quarter and posted its best first-quarter results since 2007.
The result improved on the $1.3 billion reported for the fourth quarter of last year and was better than the $1.8 billion booked during the first three months of 2021.
Russia Exposure
Switzerland’s largest bank accomplished this in the face of the Ukraine war, inflation showing no signs of abating anytime soon, and central banks that are tightening the loose-money spigots. «Our strong results today speak to our ability to accomplish our objectives regardless of the backdrop,» said UBS CEO Ralph Hamers.
UBS said it reduced its Russia exposure «early and actively» and had a direct country exposure of $400 million as of March 31 of 2022. It expects a firm-wide P&L negative impact of $100 million.
The bank said it is not conducting any new business in Russia or with Russia-domiciled clients. However, it will continue to monitor settlement risk on certain transactions with Russian bank and non-bank counterparties, which might result in «unexpected increases in exposures.»
One Billion Dollars
Pre-tax profit was $2.7 billion, improving by one billion dollars from the fourth quarter result of $1.7 and bettering the comparative year-ago quarter of $2.3 billion.
Earnings per share were $0.61 in the first quarter, up from $0.38 in the fourth quarter of last year and higher than the $0.49 reported during the first quarter of 2021, the results showed.
Wealth Management
Global wealth management (GWM) booked a pre-tax profit of $1.3 billion, with the unit reporting net new fee-generating assets of $19 billion in the first quarter compared to 36.2 billion in the same year-ago quarter. Total fee-generating assets were $3.1 trillion As of the first quarter of last year, the GWM unit no longer reports net new money every quarter, and will only disclose the figure in its annual report.
Earlier this month, finews.com reported that 2021 was a bumper year for Swiss banks attracting new money inflows. But this year, wealth and asset managers are facing geopolitical and economic uncertainty resulting from the ongoing war in Ukraine and inflation showing no sign of abating anytime soon. Add to the mix central banks that are starting to close the taps of easy money flowing into financial markets.
Investment Bank
The investment bank's division’s 126 percent pre-tax profit growth from the comparative quarter was mainly attributable to Archegos-related losses in the same quarter last year. Excluding that loss, revenues increased by 4 percent, or just over $100 million, primarily from increased revenues in equity derivatives, rates, and foreign exchange.
Outlook
While the path of economic growth has become much more uncertain, UBS expects growth in economic activity to continue, but increased uncertainty could continue to affect client activity levels and asset prices.
However, even as central banks are tightening policy to arrest rising inflation, UBS said that rising interest rates, notably the US dollar, are expected to lead to higher net interest income.
