UBS reported a net income of $1.7 billion for the third quarter of this year, slightly higher than analyst expectations, citing a challenging environment.

According to Refinitiv data, analysts expected a net profit of $1.64 billion. UBS earned $2.3 billion in net income last year.

The Swiss lender fell short of expectations in the previous quarter, posting a net profit of $2.108 billion. The bank stated at the time that the second quarter had been “one of the most difficult periods for investors in the last ten years” due to high inflation, the Ukraine war, and strict Covid-19 policies in Asia.

According to UBS, these factors remained on investors’ minds in the third quarter.

“The macroeconomic and geopolitical environment has become increasingly complex. Clients remain concerned about persistently high inflation, elevated energy prices, the war in Ukraine and residual effects of the pandemic,” Ralph Hamers, CEO of UBS, said in a statement.

However, Hamers’ Geoff Cutmore stated that there have been very strong flows into the business over the quarter, with net new fee-generating assets totaling $17 billion.

The CET 1 capital ratio, a measure of bank solvency, increased to 14.4 pert cent from 14.9 per cent the previous year.

Its investment banking division saw a 19% decrease in revenue, with lower performance in equity derivatives, cash equities, and financing revenue offset by foreign exchange revenue. Revenues in the Global Wealth Management division were also down 4 per cent year on year.

Personal and corporate banking revenues, on the other hand, increased during the same period due to more favorable Swiss National Bank rates.

On Tuesday, Hamers stated that clients on its wealth side were looking for alternative investments and cash, and he predicted that activity on its trading unit’s institutional side would remain weak in the fourth quarter.

UBS wants to grow its business in Asia, and CEO Hamers sees “some opportunities to grow” in China.

“The confirmation of [China President] Xi for another term is on one side basically the confirmation of consistency going forward, so some of the policies that he has come out with over the last year will most likely be continued,” Hamers said.

He added that the Swiss bank looks at China “by virtue of its demographics and some of the dimensions of the economy.” “We think over time it is a very attractive place, so it is a strategic place,” he added.

In other words, given the ongoing energy crisis and war in Ukraine, Hamers anticipates a “challenging” time for Europe.

“Europe will have a challenging period, a challenging winter although they have their reserves,” he said, adding that the Swiss bank expects the region to enter a recession.

In late morning European trade, UBS shares were up more than 4%.

“We consider UBS’s Q3 results were reasonably good considering the challenging operating environment although net attributable profit was down 24% compared to the same quarter the year before,” Vitaline Yeterian, senior vice president at DBRS Morningstar, said via email.

(Adapted from CNBC.com)