UBS AG posted a better-than-expected first-quarter Profit Tuesday as Switzerland's biggest bank pushes through an extended restructuring program in the wake of the financial crisis.
The Zurich-based lender said its performance was spurred partly by a typically Strong seasonal showing from its streamlined investment bank—though in future quarters UBS will likely have to rely more on its core business of managing assets for wealthy clients.
UBS said net Profit fell to 988 million Swiss francs ($1.05 billion) from 1.04 billion francs a year earlier, though analysts had expected the figure to come in at 496 million francs. The result compares With a [Dear Guest/Member you can't see link before click here to register], when UBS agreed to pay $1.5 billion to various authorities to settle investigations into its role in rigging key interest rates.
![Surprises With Strong Profit Wall OB-XH039_ubs043_D_20130430080206.jpg]()
The lender said its wealth management unit drew in 15 billion francs in net new money in the first quarter of the year, the highest level since 2007, before the financial crisis started. Its investment bank pretax Profit nearly doubled from a year earlier.
"Results for the first quarter underline the transformation of UBS," Chief Executive [Dear Guest/Member you can't see link before click here to register] told a conference call. He cautioned, however, that the turbulent global economy and a traditionally Strong first quarter for all investment banks make it difficult to forecast similarly positive results for UBS in the near future. "Clearly, it would not be realistic to expect this kind of growth going forward," he said.
In an interview, UBS Chief Financial Officer Tom Naratil said, "We're not going to run a victory lap at this point." But he added, "You'd have to feel a bit more confident."
The quarterly results bolster UBS's strategy, which differs from that of crosstown rival [Dear Guest/Member you can't see link before click here to register] AG. While UBS has sought to focus on its historical strength of wealth management in recent years while reining in its investment bank, Credit Suisse has opted to build out a more diverse operation that includes increasing activity at its investment bank. Credit Suisse [Dear Guest/Member you can't see link before click here to register], including a solid performance from its investment banking operation.
Both Swiss banks must deal With a relatively stringent domestic regulatory regime. They are each required to hold capital equivalent to at least 10% of their risk-adjusted assets in order to protect against future losses. That can eat into returns.
UBS said Tuesday its return on equity in the first quarter was 8.5%, flat compared With the same period last year. Its key Basel III fully applied common equity Tier 1 ratio reached 10.1%.
The strict capital requirements and shift in focus for UBS come in the wake of the financial crisis, which saw the bank come dangerously close to collapse.
UBS disclosed plans late last year to [Dear Guest/Member you can't see link before click here to register] over the next three to five years in a sweeping overhaul primarily focused on its investment bank.
The lender Tuesday said operating expenses in the first quarter fell 21% from the prior period to 6.33 billion francs. Total operating income rose 25% from the fourth quarter to nearly 7.78 billion francs, UBS said.
Swiss banks have come under pressure in recent years from regulators in Europe and the U.S. seeking to track down accounts in the Alpine nation that are undeclared to tax authorities. UBS executives reiterated Tuesday that they expect between 12 billion and 30 billion francs to flow out of the bank as a result of the tax crackdown.
As part of the realignment of its investment bank, UBS has withdrawn from businesses deemed excessively risky. The aim is to fashion a well-performing business "where size and scope are not necessarily the driving factors," Mr. Ermotti said Tuesday.
UBS said pretax Profit at its investment bank was 977 million francs in the quarter, compared With a loss of 243 million francs in the fourth quarter and pretax Profit of 509 million francs in the same quarter last year. Results were boosted by a single "large private transaction" in its unit dedicated to advising corporate clients on activities including mergers, though a UBS spokesman declined to elaborate.
The first quarter is traditionally a relatively Strong period for investment banks, which see a spurt in trading activity as the year begins.
UBS said Tuesday net interest and trading income at its investment bank jumped 38% in the quarter compared With the same period last year, reaching 1.83 billion francs. That compares With a 6% gain in net interest and trading income for UBS's wealth management unit.
The investment bank saw head count fall 13% in the first quarter from the same period last year, while the number of employees at UBS's wealth management unit rose 6%.
The Zurich-based lender said its performance was spurred partly by a typically Strong seasonal showing from its streamlined investment bank—though in future quarters UBS will likely have to rely more on its core business of managing assets for wealthy clients.
UBS said net Profit fell to 988 million Swiss francs ($1.05 billion) from 1.04 billion francs a year earlier, though analysts had expected the figure to come in at 496 million francs. The result compares With a [Dear Guest/Member you can't see link before click here to register], when UBS agreed to pay $1.5 billion to various authorities to settle investigations into its role in rigging key interest rates.
The lender said its wealth management unit drew in 15 billion francs in net new money in the first quarter of the year, the highest level since 2007, before the financial crisis started. Its investment bank pretax Profit nearly doubled from a year earlier.
"Results for the first quarter underline the transformation of UBS," Chief Executive [Dear Guest/Member you can't see link before click here to register] told a conference call. He cautioned, however, that the turbulent global economy and a traditionally Strong first quarter for all investment banks make it difficult to forecast similarly positive results for UBS in the near future. "Clearly, it would not be realistic to expect this kind of growth going forward," he said.
In an interview, UBS Chief Financial Officer Tom Naratil said, "We're not going to run a victory lap at this point." But he added, "You'd have to feel a bit more confident."
The quarterly results bolster UBS's strategy, which differs from that of crosstown rival [Dear Guest/Member you can't see link before click here to register] AG. While UBS has sought to focus on its historical strength of wealth management in recent years while reining in its investment bank, Credit Suisse has opted to build out a more diverse operation that includes increasing activity at its investment bank. Credit Suisse [Dear Guest/Member you can't see link before click here to register], including a solid performance from its investment banking operation.
Both Swiss banks must deal With a relatively stringent domestic regulatory regime. They are each required to hold capital equivalent to at least 10% of their risk-adjusted assets in order to protect against future losses. That can eat into returns.
UBS said Tuesday its return on equity in the first quarter was 8.5%, flat compared With the same period last year. Its key Basel III fully applied common equity Tier 1 ratio reached 10.1%.
The strict capital requirements and shift in focus for UBS come in the wake of the financial crisis, which saw the bank come dangerously close to collapse.
UBS disclosed plans late last year to [Dear Guest/Member you can't see link before click here to register] over the next three to five years in a sweeping overhaul primarily focused on its investment bank.
The lender Tuesday said operating expenses in the first quarter fell 21% from the prior period to 6.33 billion francs. Total operating income rose 25% from the fourth quarter to nearly 7.78 billion francs, UBS said.
Swiss banks have come under pressure in recent years from regulators in Europe and the U.S. seeking to track down accounts in the Alpine nation that are undeclared to tax authorities. UBS executives reiterated Tuesday that they expect between 12 billion and 30 billion francs to flow out of the bank as a result of the tax crackdown.
As part of the realignment of its investment bank, UBS has withdrawn from businesses deemed excessively risky. The aim is to fashion a well-performing business "where size and scope are not necessarily the driving factors," Mr. Ermotti said Tuesday.
UBS said pretax Profit at its investment bank was 977 million francs in the quarter, compared With a loss of 243 million francs in the fourth quarter and pretax Profit of 509 million francs in the same quarter last year. Results were boosted by a single "large private transaction" in its unit dedicated to advising corporate clients on activities including mergers, though a UBS spokesman declined to elaborate.
The first quarter is traditionally a relatively Strong period for investment banks, which see a spurt in trading activity as the year begins.
UBS said Tuesday net interest and trading income at its investment bank jumped 38% in the quarter compared With the same period last year, reaching 1.83 billion francs. That compares With a 6% gain in net interest and trading income for UBS's wealth management unit.
The investment bank saw head count fall 13% in the first quarter from the same period last year, while the number of employees at UBS's wealth management unit rose 6%.