UBSFourth-quarter profit beat market expectations, but the Swiss banking giant reported a drop in revenue due to weak client activity and warned the year ahead was “uncertain”.
The bank reported net income of $1.7 billion for the fourth quarter of last year, which projects its full-year profit to $7.6 billion in 2022. According to Refinitiv data.
The bank’s Global Wealth Management unit reported fourth-quarter net interest income growth of 35% year over year, given higher deposit margins on the back of higher interest rates. Its personal and corporate banking division also reported a 21% increase in net interest income over the same period, as a result of higher interest rates and loan revenue.
But market uncertainty hit the investment banking and asset management branches of the business. The former saw a 24% annual decline in revenue, while asset management revenue declined 31% year-on-year due to “negative market performance and foreign exchange impact”.
CEO Ralph Hamers told CNBC’s Geoff Cutmore on Tuesday, “The rate environment is helping the business side, and that reflects some of the reduced activity we see on the investment side.”
UBS reported fourth quarter and full year earnings.
Fabrice Coffrini | AFP | Getty Images
He said that there has been a change in the markets which has put pressure on the investment side of the bank.
“We saw a move from a micro focus, which is equity-focused, to a macro focus, which is rates focused,” he said, noting that the Swiss bank was not able to benefit as much from that transition. as some of its counterparts, given its smaller presence in the US
Here are some other highlights from the results:
- The CET 1 capital ratio, a measure of bank solvency, eased to 14.2% from 14.4% in the previous quarter;
- Total revenue declined to $8 billion from $8.7 billion a year ago;
- Return on tangible equity, a measure of banks’ performance, rose to 13.2% at the end of the quarter from 10% a year ago.
Looking ahead, the Swiss lender said revenue for the first quarter of 2023 was set to be “positively impacted” by higher customer activity and interest rates as well as the easing of Covid-19 restrictions in Asia.
It was, however, more cautious about the economic outlook, citing central bank activity as a potential catalyst for market volatility.
“While inflation may peak in the second half of 2022, and an energy crisis in Europe is likely to be averted, the outlook for economic growth, asset valuations and market volatility remains highly uncertain, and central bank The tightening may have an impact on market liquidity,” the bank said in its earnings release.
UBS said it would buy more of its shares this year.
“We remain committed to a progressive dividend and expect to repurchase more than $5 billion of shares in 2023,” Hammers said in a statement accompanying the results.
Shares of the bank fell more than 2% in early European trading.
“UBS posted what we expect are mixed fourth-quarter results,” analysts at Jefferies said in a Tuesday note.
“Going through the details, our strong first impression wears off as the higher earnings were actually driven by some one-offs in revenue as well as a lower tax rate. The underlying trends are more mixed,” he said.
Shares of UBS vs Credit Suisse over the past 12 months.