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UBS Earnings Report Came in Below Expectation, Analysts Predict Tough Months Ahead

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The Union Bank of Switzerland’s quarterly profit report came in smaller than expected as financial market turmoil hit its investment banking and wealth management businesses. Analysts predict continued harsh conditions for the Swiss bank in the second half. 

UBS, a Zurich-based bank, kicked off a round of earnings reports by major European lenders. According to reports, USB’s net profit in the first quarter rose by 5% to $2.1 billion. While this was slightly above the $2 billion generated a year earlier, it came far below expectations of a 19.8% rise. On the flip side, shares plummeted as much as 6%. 

According to UBS’s Chief Executive Ralph Hamers, “the second quarter has been one of the most challenging periods for investors in the last ten years.” 

UBS’s turbulence comes after a poor performance by some rivals in the U.S, who earned less money overall in the first quarter. The poor performance across different markets has also contributed to drops in dealmaking and the selling of investment products. Morgan Stanley and JPMorgan Chase & Co reported a drop in investment banking revenues. 

Earnings at UBS were positively impacted by the sale of a real estate joint venture in Japan which brought in gains surpassing $800 million. At the time of writing this report, UBS shares have edged lower by 5%. In terms of yearly outlook, UBS shares are down 6.6%. On a good note, however, US shares outperform the broad index of European banks, which has seen a 23% decline. 

UBS’s financial breakdown in the first quarter

Despite UBS’s banking business’s revenue decline of 14%, about 2.1 billion from $2.5 billion a year ago, analysts still think the bank has performed fairly well, given the global economic crises and ever-increasing interest rate hikes

Meanwhile, the group’s advisory revenue plummeted by 30%, with capital markets being the largest hit sector with a 71% drawdown. The bank has attributed the poor performance in capital markets to lower business for initial public offering. 

The bank’s wealth management division, which is its business’s largest arm, also saw revenue drop to $4.7 billion from $4.8 billion a year ago. UBS has attributed its poor performance in this division to low income from transaction fees, adding that clients in Asia and America have been on the sideline.

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