Over the past two weeks, the balance sheets of major US banks have provided clear indicators of where international banking is headed. It is unlikely that UBS will be able to escape the global market trend.
Rising interest rates and the continued weakness of financial markets will have shaped the course of business at UBS in the third quarter. Yet, the developments are partly contradictory.
While in global wealth management, the higher interest margin is expected to have a positive impact, weakening asset valuations might weigh on total assets under management.
As recently as September, wealth management head Iqbal Khan spoke of positive development in net new money inflows in the third quarter. He referred to the slowdown in the second quarter as an “anomaly.” The bank set a target of increasing net inflows of fee-generating assets by more than five percent over the cycle.
Investment Banking Slump
The slump in mergers and acquisitions and significantly lower issuance activity are also likely to have weighed on investment banking at UBS. ZKB analyst Michael Klien expects profits to slump by around 60 percent in this area.
Profits in asset management and personal & corporate banking are also likely to be significantly lower than in the same period last year, although the latter is expected to show the smallest drop. Provisions for credit risks, which have grown as a result of the economic trend and rising interest rates, are still variable.
It will be interesting to see how new offerings such as Key4 or the Circle One platform launched in Asia are received by customers.
At the bank's half-year results, CEO Ralph Hamers confirmed its outlook, saying that the growing uncertainty caused by the Ukraine war, energy prices, inflation and rising interest rates would likely affect customer activity.
The bank is likely to stick to its strategy which focuses on reducing costs and digitalization. Technology is needed to improve both the interaction with customers and the bank's own way of working.
