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UBS third-quarter earnings driven higher by fees from wealthy clients

UBS Group AG posted its highest quarterly net profit since 2015 and announced plans for a digital investing tool that it hopes will expand its wealth-management business beyond the very rich.

Switzerland’s largest bank reported higher fees from wealthy clients and from corporate deal making. Its $2.3 billion in profit easily topped analyst profit estimates of around $1.6 billion, though the bank warned client activity would likely slow in the final three months of the year.

UBS caters to the world’s elite, connecting clients of its giant private bank to trading markets and deals that its investment bankers bring in. That mix of businesses held up well during the pandemic when financial markets boomed and assets of all stripes gained in value.

The bank also avoided big loan losses, as well as provisions for future loan losses. Most of its lending is to financially solid Swiss households and companies, or to wealthy customers whose financial portfolios it manages. Credit losses in the quarter were $14 million.

Chief Executive Ralph Hamers, who has been in the role for a year, has said he wants UBS to shed its stuffy image and modernize how it interacts with customers. He was hired from ING Groep NV last year after helping that bank to automate services and add online customers.

To that end, UBS on Tuesday announced a new digital-investing tool that will launch next year in the U.S. It will target customers with between $250,000 and $2 million in assets, down-market from its current client base. Customers will be able to select from recommended investments and bounce their portfolios off a human adviser if desired.

It will move UBS into more direct competition with U.S. rivals such as Morgan Stanley and Bank of America Corp.’s Merrill Lynch, which have been building apps to bring in less-affluent households. UBS executives have acknowledged the risk of diluting a handshake business, but growing assets remains key and there are only so many billionaires.

UBS’s third-quarter profit rose 43% at UBS’s wealth management arm, which manages $1.4 trillion in fee-generating assets.

Profit in its investment bank rose 32% in the quarter. Most of the growth was in advising companies on stock and bond sales as well as mergers. Big banks in Europe and the U.S. have reported booming earnings from securities trading and corporate deal making.

In December, a French court will decide on an appeal by UBS of a 2019 verdict that found the bank had helped French customers evade taxes and imposed about $5 billion in penalties.

UBS also was one of the hardest hit banks when family office Archegos Capital Management defaulted on large derivatives transactions earlier this year. UBS’s investment bank lost $861 million exiting its Archegos trades, of about $10 billion lost by a group of banks. Its smaller Swiss rival, Credit Suisse Group AG, lost $5.5 billion.

Corrections & Amplifications

UBS’s wealth management arm reported a 43% rise in operating profit and a 23% increase in recurring net fee income. An earlier version of this article said operating profit rose 17%. Also, profit for UBS’s investment bank rose 32% in the quarter. An earlier version of this article said profit rose 11%. (10/26)

 

This story has been published from a wire agency feed without modifications to the text

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