(BFM Bourse) – The Swiss bank posted a profit of $1.75 billion in the first quarter, significantly above expectations, after two quarters of losses. Wealth management and retail banking performed well.
Having become a global banking giant after being pushed last year by the Swiss authorities to buy Credit Suisse and thus avoid a global financial crisis, UBS takes center stage on the European Stock Exchange this Tuesday.
The Swiss establishment gained 9.4% on the Zurich Stock Exchange around 3:30 p.m., thanks to first quarter results above expectations.
“A little over a year ago, we were asked to play a vital role in stabilizing the Swiss and global financial systems by acquiring Credit Suisse and we are delivering on our commitments. This quarter marks the return to net profits and the continued increase in capital, which demonstrates the solidity of our activities”, declared the general director, Sergio Ermotti, quoted in a press release.
>> Access our exclusive graphic analyses, and gain insight into the Trading Portfolio
Profit significantly above expectations
After two consecutive quarters in the red, UBS has indeed published a net profit of $1.76 billion for the first three of 2024, well exceeding the consensus at $602 million, according to Royal Bank of Canada.
By division, Jefferies highlights the good performance of UBS wealth management which generated underlying operating profit which exceeded expectations by 17% to $1.27 billion. Retail banking (“personal and corporate banking”) generated underlying operating profit of $878 million, or 4% more than the consensus. The investment bank also beat expectations, with underlying operating profit of 404 million euros, 24% above consensus.
The Swiss bank also published a CET 1 solvency ratio, which relates equity to risk-weighted outstanding assets, of 14.8% when the consensus was only at 14.4%. The company significantly reduced its risks, by 4% ($20 billion) compared to the previous quarter, thereby reducing its capital consumption.
The rules of “too big to fail”
Concerning its outlook, UBS notably indicated for the second quarter to expect a “low to mid single digit” drop, i.e. between 1% and 6%, in its wealth management revenues due in particular to a decline in loan and deposit volumes and lower rates in Switzerland. The Swiss National Bank (SNB) was, in fact, the first major Western central bank to lower its key rates at the end of March. UBS also expects a “mid to high single digit” drop in dollars, from 5% to 9%, in its retail banking, again citing the SNB’s rate cuts.
Furthermore, investors were awaiting potential indications on the impact that the tightening of “too big to fail” regulations could have, i.e. the rules to prevent the collapse of a systemic bank taking taxpayers and the financial system with it. . In April, the Swiss Federal Council presented a set of measures to strengthen this legislation. This while Switzerland had been singled out for having resolved a financial crisis by creating a banking giant, likely to undermine the Swiss economy if it were to collapse.
“It’s an important discussion to have for the country,” acknowledged Sergio Ermotti during the conference with analysts, quoted by Agence France Presse (AFP). “But it is still too early to speculate on its impact,” he added, saying he hoped for a reasonable outcome at the end of this debate.
AFP mentions “expert calculations” which put the liquidity cushion that would be necessary to comply with this regulatory tightening between $15 billion and $25 billion. “The ‘too big to fail’ proposition remains an uncertainty,” judges Royal Bank of Canada.
Julien Marion – ©2024 BFM Bourse