On March 23, 2023, the logo of Swiss banking giant UBS in Zurich.
Fabriscofini | AFP | Getty Images
Swiss bank Titan UBS doubled its net profits year-on-year on Wednesday, beating revenue expectations amid a boost from investment banks and the global asset management sector.
Shareholder-related net income hit $2.395 billion in the second quarter, up from $1.136 billion in the same period last year, with average LSEG analyst forecasts falling $190.1 billion. Bank revenues over the period reached $1.2112 billion, with analysts’ forecasts below $12.45 billion.
Includes other quarter highlights.
Compared to 8.5% in the quarter in March, the CET 1 capital ratio, a measure of bank solvency, was 14.4%.
The global market force of lenders’ investment banking division achieved a 25% increase in annual revenues of $2.5 billion, “tracking extraordinary levels of volatility at the beginning of the quarter.” In the Global Wealth Management division, trading-based revenues rose 12% in the three months leading up to the end of June.
Lenders’ Net Interest Income (NII) – The difference between profits on loans and investments and interest paid on deposits was $1.965 billion after UBS induced a “single-digit low percentage” decline in the second quarter.
In the third quarter, banks expect a “widely stable” NII in the Swiss franc’s global asset management and corporate banking sector, but expects “on the US dollar terms, this will lead to a single-digit low percentage increase.”
NII performance is particularly concerning to investors. This is especially concerning given that Switzerland’s June returned to 0% interest rates in a broader battle to stem the decline in national inflation and the strength of the Swiss franc.
UBS stocks have suffered this year as a result of lenders’ exposure to the US market as a result of Washington’s exposure to the US market in the wake of the so-called mutual tariff levies that caused uncertainty about the world’s largest economy.
“Investor sentiment remains broadly constructive, tempered by sustained macroeconomic and geopolitical uncertainties,” UBS said Wednesday. “Contrary to this background, our clients’ conversations and trading pipelines show a high level of readiness among capitalist investors and companies as convictions on macro outlook will be strengthened.”
Domestic, UBS has been locked in a withdrawn line with Swiss authorities and in June proposed strict new capital rules requiring banks to hold an additional $26 billion in core capital. This measure is specifically intended to address concerns about UBS’s ability to mitigate potential losses in foreign units. Following UBS’s acquisition of Credit Swiss security, Swiss regulators evaluated lenders becoming “too big to fail” and dragging Swiss national economy and financial system in default cases.
UBS is fighting the designation, saying it supports the regulatory proposal in June “as a rule” but opposes a “extreme” increase in capital requirements, estimated it will hold a total of around $42 billion in CET1 capital.
Higher capital requirements can significantly reduce the bank’s balance sheet and credit supply, attenuate risk appetite, and affect the availability of discretionary funds.
In late June, Swiss parliamentary committee supported a motion that could delay some of UBS’s bank proposals, according to Reuters.
