Union Bank of Switzerland (UBS) disappointed Wall Street on Tuesday by missing expectations for the second quarter of 2022 due to declining client activity in its wealth management and investment banking divisions.
Switzerland’s largest bank reported a $2.108 billion net profit attributable to shareholders, falling short of the $2.404 billion anticipated by analysts.
The company’s net profit for the period rose 5% from the $2 billion reported last year, during which the flagship wealth management business experienced a windfall from wealthy investors, and follows a very successful quarter in which its net profit was $2.136 billion.
“The second quarter was one of the most challenging periods for investors in the last 10 years. Inflation continues to be high, the war in Ukraine is ongoing, as are strict Covid policies in parts of Asia,” said UBS CEO Ralph Hamers. “In these uncertain times, our clients rely on our powerful ecosystem to navigate markets and invest for the long term.”
Highlights from the quarter include:
- For the same period last year, revenues totaled $8.897 billion, compared with $8.917 billion this year.
- The return on tangible equity was 16.4%, up from 15.4% a year ago.
- A measure of bank solvency, the CET 1 capital ratio, reached 14.2%, down from 14.5% in the second quarter of 2021.
The investment banking revenue declines
The amount of investment banking revenue came in at $2.094 billion, a decrease of 14% from last year.
The bank’s report emphasizes a $1.121 billion decrease in net fees and commissions, mainly driven by a “decrease in underwriting fees, particularly in Equity Capital Markets, and a decrease in net brokerage fees due to lower levels of client activity in Global Wealth Management and the Investment Bank.”
The report further added that “Investment fund fees decreased, reflecting negative market performance and lower performance fees, and revenues from merger and acquisition transactions also decreased.”
During the second quarter, equity and fixed income markets decreased strongly, which weighed on the bank’s wealth management business, which saw net inflows of three billion dollars in Asia-Pacific but a muted $400 million abroad.
In addition, the asset management business lost $12 billion, mainly due to outflows in equities.
“Institutional clients remained active on the back of high volatility. We supported them with advice and execution while handling very high volumes,” Hamers said.
“At the same time, private clients stayed on the sidelines. We continued to support them with deposits and loan offerings, both of which saw particularly robust year-on-year growth in the Americas.”