Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

UBS fee bonanza lifts quarterly profit to six-year high

Published 26/10/2021, 06:06
Updated 26/10/2021, 09:41
© Reuters. FILE PHOTO: The logo of Swiss bank UBS is seen in Zurich, Switzerland October 25, 2018. REUTERS/Arnd Wiegmann

© Reuters. FILE PHOTO: The logo of Swiss bank UBS is seen in Zurich, Switzerland October 25, 2018. REUTERS/Arnd Wiegmann

By Brenna Hughes Neghaiwi

ZURICH (Reuters) -UBS posted its highest quarterly profit since 2015 on Tuesday, as robust trading activity by the world's ultra wealthy led to a 23% surge in fee income.

The surprisingly strong results follow double-digit percent gains for net profit in each of the past four quarters and come as Switzerland's largest bank announced new plans for its digital push including a new advisory service for affluent U.S. clients.

Third-quarter net profit came in at $2.279 billion, easily surpassing a median estimate of a 24% slump to $1.596 billion from a poll of 23 analysts compiled by the bank.

"We continue to perform well above the financial targets that we have given you. And while we do that, we continue to be focused on driving growth on the top and the bottom line," Chief Executive Ralph Hamers said on a call with analysts.

The bank's flagship wealth management business posted its best pre-tax profit ever, soaring 43% on a 4% climb in income from transactions amongst its wealthy and ultra-wealthy clients as well as a 15% rise in net interest income due to higher lending levels and margins.

The division saw $18.8 billion in fresh client fee-generating inflows, while invested assets fell slightly from June to $3.198 trillion.

UBS's investment bank posted a steadier performance, with revenue edging 1% higher. Revenue in its equities trading unit was up 3% to $1.36 billion, but its foreign exchange, rates and credit arm posted a 32% drop in turnover to $363 million.

Revenue from advising on deals and listings jumped 22% to $792 million, helped by bumper M&A volumes.

The surprise profit comes on the heels of a stellar quarter for U.S. and British banks which, encouraged by economic rebounds, released cash set aside for pandemic losses. A record wave of dealmaking activity also bolstered results for the likes of Goldman Sachs (NYSE:GS) and JPMorgan (NYSE:JPM).

UBS shares were 1.4% higher in morning trade.

"The result marks another impressive quarter," Citi analysts said in a note to clients, adding that UBS remained one of their top picks in the banking sector and reiterating a buy rating on the stock.

It nonetheless sounded a slightly cautious note for the coming quarter, saying continued uncertainty surrounding economic recovery and recent policy changes in China could hurt business. It also noted client activity levels had been unusually high in the past quarter.

DIGITAL FLOURISH

CEO Hamers, who took the reins in November 2020 following a successful tenure at ING that made the Dutch lender more digitally savvy, said he planned to present an updated strategy on Feb. 1.

That will include new pushes into digital and hybrid banking.

UBS is trying to improve its digital services to reach more customers outside its super rich core client base, while also saving on costs. It sees potential for a new online platform to pull in $30 billion in the next year after being launched in May 2020, Reuters reported in June.

As part of its 2025 vision, it now wants to build a digitally scalable advice model for affluent clients in the Americas, which includes the core wealth market of the United States.

It also wants to expand its digital offerings in its home market, aiming to bring its cost/income ratio down to 55% in its Swiss business from 59% in the first nine months.

© Reuters. FILE PHOTO: The logo of Swiss bank UBS is seen in Zurich, Switzerland October 25, 2018. REUTERS/Arnd Wiegmann

UBS derives the biggest chunk of its profits from advising and managing money for the world's rich, while also maintaining smaller global investment banking and asset management operations. It conducts retail and corporate banking only in its home market.

That model has helped Switzerland's largest lender exceed expectations since the outbreak of the coronavirus pandemic, as buoyant markets helped it generate higher earnings off of managing money for the rich.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.