Higher rates benefit UBS, but fewer clients mean reduced revenues

• Swiss bank UBS reported $1.7 billion of net income for the fourth quarter of last year.
• Bringing its full-year profit to $7.6 billion in 2022.
• The rate environment is helping the business on one side, and that offsets some of the lower activity.

Although UBS’ fourth-quarter profit above market forecasts, the Swiss banking behemoth reported a decline in sales due to decreased client activity and issued a “uncertain” outlook for the next year.

The bank announced net income of $1.7 billion for the fourth quarter of 2018, increasing the full-year profit in 2022 to $7.6 billion. According to Refinitiv statistics, analysts had predicted UBS would report net profits of $1.3 billion in the fourth quarter and $7.3 billion for the entire year.

However, the company’s investment banking and asset management divisions were impacted by the market uncertainties. Revenues in the former declined by 24% annually, while those in asset management fell by 31% annually as a result of “poor market performance and foreign currency implications.”

CEO Ralph Hamers said to CNBC’s Geoff Cutmore on Tuesday, “The rate environment is supporting the business on one side, and that offsets some of the decreased activity that we see on the investment side.”

A change in the markets, he continued, had put pressure on the bank’s investment division.

He stated, “We observed a trend from what we would call micro emphasis, which is equity-focused, to macro focus, which is rates oriented.” He added that the Swiss bank was less able to profit from this change than some of its competitors due to its smaller position in the U.S.

Uncertain’ outlook

The Swiss lender predicted that increased customer activity, higher interest rates, the relaxation of Covid-19 limitations in Asia, and other factors would “positively influence” first-quarter income in 2023.

In contrast, it expressed caution about the overall economic outlook, pointing to central bank activity as a potential driver of market volatility.

The outlook for economic growth, asset valuations, and market volatility remain highly uncertain, and central bank tightening may have an impact on market liquidity, the bank stated in its earnings release. “While inflation may have peaked in the second half of 2022, and an energy crisis in Europe seems likely to be avoided, the outlook for economic growth, asset valuations, and market volatility remains highly uncertain.”

This year, UBS announced it will increase its stock purchases.

In a statement released along with the findings, Hamers stated, “We remain committed to a progressive dividend and expect to repurchase more than $5 billion of shares in 2023.

In early European trading, the bank’s shares decreased by more than 2%.

UBS reported what analysts at Jefferies considered to be mixed fourth-quarter earnings, they said in a note on Tuesday.

When we look at the specifics, our initial enthusiasm is somewhat dampened because the greater earnings are actually the result of some one-time revenue sources and a low tax rate. Overall trends are more inconsistent, they claimed.

Also Read

Pierin Vincenz: Swiss banker claimed costs for strip-club visits

The former chief of a Swiss bank was sentenced to nearly four...