Net profit in the first quarter was $2.14 billion, up 17% year on year and well above expectations.
The number one Swiss bank UBS posted a very good performance at the start of the 2022 financial year, despite geopolitical uncertainties. Net profit in the first quarter amounted to 2.14 billion dollars (2.05 billion francs), up 17% over one year and well above expectations.
Revenue swelled 7.9% to $9.36 billion, according to data from the big bank on Tuesday. Operating expenses took 3.5% to 6.63 billion. The expense-to-revenue ratio came in at 70.7%, within the bank’s target of 70-73%.
Pretax profit reached $2.73 billion, representing an increase of almost 19%. This indicator includes the constitution of new provisions for credit risk in the amount of 18 million dollars. The majority of these figures blow the expectations of the AWP consensus.
The record is a bit mixed when it comes to divisions. The very important unit devoted to wealth management, Global Wealth Management (GWM), generated pre-tax income of 1.31 billion dollars (-7%), falling within the lower range of forecasts. This poor performance is mainly due to an increase in expenses and provisions.
GWM’s net fee-earning cash inflows reached $19.4 billion.
The Asset Management division (-23% to 174 million) missed the forecast mark. Thanks to a jump of 126% of the result to 929 million dollars, the business banking division Investment Bank (IB) achieved an excellent performance.
The first quarter suffered from extraordinary macroeconomic and geopolitical factors, said Chief Executive Officer (CEO) Ralph Hamers, quoted in the press release.
Reduced risks in Russia
UBS recalls that it does not conduct new business in Russia or with clients domiciled in the country. The bank’s exposure to the three keys in Russia was reduced to $0.4 billion at the end of March, from $0.6 billion three months earlier. This amount includes in particular trade financing contracts in the Personal & Corporate Banking division or even credit and derivatives for IB, specifies the banking giant.
In wealth management, 0.7% of invested assets are linked to Russian clients not established in Switzerland or in the European Economic Area. The Western sanctions taken in response to the invasion of Ukraine concern in particular these people, whose deposits can no longer exceed 100,000 euros.
UBS has no significant and direct exposure in Ukraine and Belarus, the Kremlin’s ally in the conflict.
A widely followed indicator of profitability, the return on Tier 1 capital reached 14.3%, exceeding UBS’s target of around 13%.
For the remainder of the year, UBS expects client business to remain affected by the war in Ukraine and its impact on financial markets. Rising rates in the United States should lead to an increase in interest income.