Thursday, 28 March 2024

UBS 2Q adjusted profit before tax CHF 1.7 billion

Zurich/Basel, 29 July 2016 – In the second quarter of 2016, UBS delivered strong results with an adjusted profit before tax of CHF 1,672 million, up slightly on the second quarter 2015 when market conditions were more favorable, particularly in Asia. Net profit attributable to UBS Group AG shareholders was CHF 1,034 million, with diluted earnings per share of CHF 0.27. Group annualized adjusted1 return on tangible equity was 10.1%. This performance was achieved against the backdrop of continued economic and heightened geopolitical uncertainty, which led to ongoing and pronounced low client activity, and subdued primary market issuance.

UBS maintained its strong capital position, with a fully applied CET1 capital ratio of 14.2% and a fully applied CET1 leverage ratio of 3.4%. Risk-weighted assets (RWA) were stable from the prior quarter at CHF 214 billion, despite ongoing regulatory inflation. The fully applied leverage ratio denominator (LRD) decreased slightly to CHF 898 billion.

As of 30 June 2016, the Group achieved its previously announced target of CHF 1.4 billion of net cost savings, a CHF 200 million improvement in the quarter, making progress toward the CHF 2.1 billion 2017 year-end target, while continuing to absorb substantially higher regulatory costs. UBS is taking responsible measures to save costs across the firm in light of the current challenging environment. At the same time, UBS is ensuring that its control framework, quality of client service and strategic growth priorities are not compromised.

Second quarter 2016: Divisional and Corporate Center performance overview

Wealth Management delivered an adjusted1 profit before tax of CHF 606 million, down CHF 163 million from the second quarter of 2015, a resilient performance despite much more subdued client activity. Wealth Management attracted net new money of CHF 6.0 billion, while remaining focused on sustainable profitability, driven by strong net inflows from Asia Pacific and Switzerland partly offset by cross-border outflows in emerging markets and Europe. Net new mandates in the quarter were CHF 6.9 billion, increasing penetration to 27.1% of invested assets.

Wealth Management Americas recorded an adjusted1 profit before tax of USD 281 million compared with USD 231 million in the second quarter of 2015, reflecting record net interest income and lower operating expenses. Net new money in the second quarter was USD 2.4 billion, despite seasonal tax-related outflows, compared with USD 0.7 billion of net outflows in the same quarter last year.

Personal & Corporate Banking posted an adjusted profit before tax of CHF 463 million, up from CHF 414 million in the second quarter of 2015, the best quarterly result since the fourth quarter of 2008, with higher operating income and lower operating expenses, despite continued challenges from negative interest rates. The annualized net new business volume growth rate for the personal banking business was a solid 3.0%, with record first-half-year net new clients, driven by the firm’s market-leading e-banking and mobile offering.

Asset Management delivered an adjusted profit before tax of CHF 148 million, a 10% increase from CHF 134 million in the same quarter last year, mainly due to higher performance fees in Global Real Estate. Excluding money market flows, net new money outflows were CHF 8.8 billion, driven by asset allocation moves, including from active to passive investments, and clients’ liquidity needs.

The Investment Bank posted an adjusted profit before tax of CHF 447 million compared with CHF 617 million in the second quarter of 2015. The annualized adjusted return on attributed equity was strong for the quarter with prudent risk and resource management, as well as decisive actions on costs. Investor Client Services was down year-on-year despite a strong performance in Foreign Exchange, Rates and Credit. Corporate Client Solutions’ revenues decreased, partly due to lower global fee pools, reflecting prudent risk appetite in deal participation. The Investment Bank’s RWA stood at CHF 64 billion and the LRD was CHF 267 billion as of quarter end.

Corporate Center – Services recorded an adjusted1 loss before tax of CHF 213 million, a CHF 40 million improvement on the second quarter of 2015. Group Asset and Liability Management recorded an adjusted profit before tax of CHF 70 million. Non-core and Legacy Portfolio posted an adjusted loss before tax of CHF 124 million and reduced LRD by CHF 8 billion to CHF 33 billion from the first quarter 2016.

UBS supports United Nations’ sustainability initiatives

In June, UBS announced the winner of the UBS Grand Challenge, an internal competition that mobilized over 1,200 employees to develop innovative solutions for five of the new UN Sustainable Development Goals. The winning team’s solution was a “save-as-you-go“ mobile payment technology to help reduce pension gaps among lower- and middle-income individuals, allowing them to automatically save for their retirement every
time they make an electronic payment. The winning team will now work with the Center for Global Development to bring the product to market.

As one of the first signatories of the UN Global Compact, and with one of the largest portfolios of sustainable investment funds, UBS is supporting the launch of the UN Global Compact 100 sustainability index. UBS helped develop the index, which provides investors with a benchmark to invest in environmental, social and governance (ESG) adherent businesses.

Awards and achievements
Wealth management researcher Scorpio Partnership confirmed UBS as the world’s largest wealth manager with a total of USD 1.7 trillion assets under management. At the recent Euromoney Awards for Excellence, UBS received accolades as the World’s Best Bank for Wealth Management, Best Bank in Switzerland and World’s Best Bank for Markets among others. UBS Investment Bank’s innovative trading platform, UBS Neo, was honored at the Profit & Loss (P&L) Digital FX Awards 2016 with four awards, including Best Platform. It also won the Client Experience Award, and awards for Best Rates Platform and Best Structured Products Platform. FinanceAsia recognized UBS with a string of Platinum awards in its 20th anniversary edition, including the pan-Asia Platinum award for Best Private Bank and as joint winner in the Best Equity House category. UBS was also confirmed recently as Switzerland’s most popular employer among business students in the annual Trendence Institute survey.

Outlook

Sustained market volatility, underlying macroeconomic uncertainty and heightened geopolitical tensions, exacerbated by the impact of the UK referendum vote to end EU membership, continued to contribute to client risk aversion and generally low transaction volumes. These conditions are unlikely to change in the foreseeable future. Furthermore, lower than anticipated and negative interest rates and the relative strength of the Swiss franc, particularly against the euro, still present considerable headwinds. In addition, the changes to the Swiss bank capital standards and proposed further changes to the international regulatory framework for banks will result in increasing capital requirements and costs. UBS is well positioned to benefit from even a moderate improvement in conditions and remains committed to executing its strategy with discipline to mitigate these effects.

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