Despite one of the most challenging investment environments in a decade, Switzerland's largest bank managed to match its first-quarter profit performance in the second.
UBS reported a net profit of $2.1 billion in the second quarter despite facing numerous challenges and despite an 11 percent drop in pre-tax profit in the global wealth management (GWM) unit, the bank reported Tuesday.
Wealth Management
The GWM unit posted a pre-tax profit of $1.2 billion in the second quarter compared to the same three-month period last year. Invested assets for the unit stood at $2.8 trillion. Although net new fee-generating assets grew by a modest 400 million in the second quarter, they increased by $19.8 billion through the first half of the year, underscoring the challenges faced during the second quarter.
Switzerland and the Asia Pacific region reported net new money inflows during the second quarter of $1.1 and $3.3 billion respectively during the second quarter. The Americas region saw net outflows of $3.5 billion, while EMEA reported a $500 million outflow.
In the asset management (AM) division, UBS booked a pre-tax profit of $1.0 billion. The unit saw net new money outflows of $12 billion in the second quarter, although for the January to June period, flows were a positive 2 billion. Invested assets for the unit were $1.0 trillion, according to UBS.
Difficult Times
«The second quarter was one of the most difficult periods for investors in the last decade. Inflation remained high, the war in Ukraine continued, and parts of Asia continued to pursue a strict corona policy. In these uncertain times, our customers rely on our strong ecosystem to help them to meet market conditions and invest for the long term,» said UBS CEO Ralph Hamers.
Today's financial results translate into diluted earnings per share of $0.61.
Outlook
The report said that high and increasing inflation and tight labor markets in many countries have led central banks to raise interest rates at an accelerated pace. The implications of Russia’s ongoing war in Ukraine, including higher energy and commodity prices, as well as the continuing effects of the pandemic and related restrictions, particularly in Asia Pacific, have increased uncertainty about the global economic outlook. As a result, equity and fixed income valuations declined steeply in the second quarter and high volatility persisted.
Against this backdrop, client sentiment and activity among our private clients remained muted in the second quarter of 2022, while institutional trading activity remained strong. We expect these uncertainties to continue to affect client sentiment, which, combined with normal seasonality, may also affect client activity levels in the third quarter of 2022. While lower asset valuations will hurt our recurring net fee income and weak client sentiment may affect net new assets in our asset-gathering businesses, we expect higher interest rates will positively affect our net interest income.
