UBS Profits Rise in Q3 Thanks to High Net Worth Fees

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

Switzerland’s largest bank reported higher fees from high net worth clients and entering into corporate deals. Its $ 2.3 billion profit easily exceeded analysts’ profit estimates of around $ 1.6 billion, although the bank warned that customer activity would likely slow in the last three months of the year. ‘year.

UBS caters to the global elite, connecting clients of its giant private bank to the commercial markets and transactions that its investment bankers offer. This mix of companies held up well during the pandemic when financial markets exploded and assets of all stripes rose in value.

The bank also avoided significant loan losses, as well as provisions for future loan losses. Most of its loans are intended for financially sound Swiss households and companies, or for high net worth clients whose financial portfolios it manages. Credit losses during the quarter were $ 14 million.

Managing Director Ralph Hamers, who has been in the post for a year, said he wanted UBS to shed its stifling image and modernize its interactions with customers. He was hired by ING Groep NV last year after helping this bank automate services and add customers online.

To that end, UBS on Tuesday announced a new digital investment tool that will launch in the United States next year. Clients will be able to choose from recommended investments and bounce their portfolios on a human advisor if they wish.

This will put UBS in more direct competition with its American rivals such as Morgan Stanley and Merrill Lynch of Bank of America Corp., which have created apps to attract poorer households. UBS executives have recognized the risk of diluting a handshake deal, but asset growth remains key and there are only a limited number of billionaires.

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

Its investment bank’s profit rose 32% in the quarter. Most of the growth occurred in advising companies on stock and bond sales as well as mergers. Major banks in Europe and the United States have reported booming profits from trading in securities and entering into corporate deals.

In December, a French court will rule on UBS’s appeal of a 2019 verdict that the bank helped French clients evade tax and imposed around $ 5 billion in penalties.

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

Corrections and amplifications

UBS’s wealth management arm recorded a 43% increase in operating profit and a 23% increase in recurring net commissions. An earlier version of this article stated that operating profit increased by 17%. In addition, UBS investment banking profit rose 32% in the quarter. An earlier version of this article indicated that profit increased by 11%. (10/26)

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