Its highest quarterly profits since 2015 were reported by UBS on Tuesday driven by a 23 per cent growth in its fee income from the ultra-rich of the world.
The unexpectedly strong income follows four quarters of the bank reporting double-digit percentage net profit growth and comes at a time when fresh plans for its digital drive, including a new advice service for affluent US clients was revealed by Switzerland’s largest bank.
The bank reported a net profit for the third quarter of $2.279 billion which easily beat a median projection of a 24 per cent drop of the metric to $1.596 billion based on a poll of 23 analysts as 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.
Its biggest pre-tax profit ever was made by the bank’s main wealth management unit as it reported a 4 per cent rise in growth in revenue from transactions among its wealthy and ultra-wealthy clients while a 15 per cent growth in net interest income due to greater lending levels and margins.
New client fee-generating inflows totaled $18.8 billion, but invested assets decreased marginally to $3.198 trillion from June.
The investment banking division of UBS had more consistent performance, with revenue increasing by 1 per cent. The company’s equities trading division had a 3 per cent growth in revenue to $1.36 billion, but its foreign currency, rates, and credit division saw a 32 per cent decline in turnover to $363 million.
Due to increased M&A activity, revenue from advising on acquisitions and listings increased by 22 per cent to $792 million.
The unexpected rise in profit follows a strong quarter for US and British banks, which, buoyed by improving economic conditions, released capital set aside for pandemic losses. The profits of Goldman Sachs and JPMorgan Chase were also boosted by a record surge of deal-making activity.
“The result marks another impressive quarter,” Citi analysts said in a note to clients.
They added that the stocks of UNS were still among their top picks in the banking sector while also reiterating a buy rating on the stock.
Despite this, however, analysts also struck a slightly cautionary note for the coming quarter, warning that prolonged uncertainty about the economic recovery and recent regulatory changes in China could harm business. Client activity had been exceptionally high in the previous quarter, according to the report.
CEO Hamers said he wanted to unveil an updated strategy on Feb. 1 after taking the helm in November 2020 after a successful time at ING, where he helped the Dutch lender become more digitally aware.
New pushes into digital and hybrid banking will be part of this.
UBS is attempting to improve its digital offerings in order to reach out to more clients outside of its ultra-wealthy core client base while reducing costs.
(Adapted from MoneyControl.com)