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January 22, 2019

UBS swings to profit in Q4 but lags in wealth management performance

Swiss banking group UBS has reported net profit attributable to shareholders of $696m for the fourth quarter of 2018.

A year ago, the bank posted a net loss of $2.41bn, hit by the US tax reform.

The group’s fourth quarter pre-tax profit slumped 20% to $860m from $1.07bn last year on an adjusted basis. Reported pre-tax profit rose 2% year-on-year to $862m.

Operating income stood at $6.97bn, down 3% from $7.2bn a year earlier. Operating expenses decreased 4% to $6.11bn.

The bank’s CET1 capital ratio and CET1 leverage ratio were 13.1% and 3.8%, respectively, at the end of December 2018.

“Q4 was a challenging quarter,” UBS’s CEO Sergio Ermotti said during today’s results presentation in Zurich, Switzerland. “We had a resilient performance. Our net profit went up 2% which is not something that we’d see in the industry today.”

Wealth management

UBS’ global wealth management arm posted adjusted pre-tax profit of $769m for the fourth quarter of 2018, a fall of 22% compared to the same quarter in 2017. Net new money outflows were $7.9bn.

Compared to the previous year, the division’s adjusted operating expenses increased 5% to $3.29bn. The rise was said to be driven by technology investments, higher regulatory expenses, and increased provisions for litigation matters.

Adjusted operating income at the wealth unit dipped 2% to $4.06bn.

Adjusted pre-tax profit at the group’s asset management business stood at $134m in the fourth quarter of 2018, up 15% from the corresponding quarter of 2017.

The unit’s adjusted operating income dropped 1% to $469m from $476m last year.

Adjusted operating expenses at the division decreased 7% year-on-year due to lower general and administrative and personnel expenses.

New inflows expected from America

Last year UBS announced that it would merge its US and international wealth management operations in order to bank more American UHNWIs.

“That part of the plan is not changing”, Ermotti said this morning. He reaffirmed his commitment to bring in $70bn in new inflows from the US over the next three years, a target first announced in October last year.

“We did better than them”, Ermotti said of UBS’s US competitors, “both on a quarter-on-quarter and year-on-year basis.”

Morgan Stanley saw its wealth income tumble in its fourth quarter results released last week. The division’s net revenues dropped 7%.

BNY Mellon reported a 26% slump in net income compared to $1.12bn in the fourth quarter of 2017. And while Bank of America saw an increase in wealth income, its assets under management fell in the fourth quarter from $1.08 trillion a year ago to $1.02 trillion at the end of December 2018. 

However, Ermotti warned against complacency: “In the US the fact that we are doing slightly better than our pears does not been we can be complacent”.

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