UBS has posted a 40% jump in Q1 2020 net profit driven by increased trading volumes amid the market volatility caused by the Covid-19 pandemic, even as it lifted credit loss expenses.

Group highlights

The SWiss wealth bank reported a net profit of $1.59bn for Q1 2020, compared to $1.14bn a year ago.

Operating income rose 10% to $7.93bn from $7.22bn in the first quarter of 2019.

However, the impact of Covid-19 already showed off with credit loss expenses for the quarter jumping to $268m from $20m, of which $122m was in Investment Bank and $53m in Global Wealth Management (GWM).

The bulk of its credit exposure is in Switzerland or with GWM clients and is of “high quality”, UBS said.

At the same time, total risk-weighted assets rose 10% to $286bn.

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By GlobalData

The bank’s CET1 capital ratio, a key measure of its strength, was 12.8% at the end of March 2020.

Growth across all businesses

The Q1 results were driven by strong performances across all its businesses.

Of them, investment banking arm registered the biggest surge buoyed by market turmoil resulting from the pandemic.

Pre-tax profit at Investment Bank soared to $709m from $207m.

Global Markets revenue surged 44% year-on-year to $619m, driven by higher volumes and volatility mainly in “Foreign Exchange, Rates and Cash Equities revenues”.

GWM pre-tax profit of $1.22bn was 41% higher than the prior year. Operating income at the unit increased by 14% with consistent growth in revenues.

In Asset Management unit, pre-tax profit soared 52% to $157m from $103m. Operating income at the unit rose 15% year-on-year.

UBS Group CEO Sergio Ermotti said: “As a result of years of disciplined strategic execution, risk management and sustained technology investments, we enter these turbulent times from a position of strength.”

Outlook

Despite the surge in profit, UBS expects difficulties going forward due to the global health crisis.

The bank warned of rising levels of credit loss expenses for the financial services sector owing to the pandemic.

It refrained from making any forecast about the timing of an economic recovery saying that the crisis has “dramatically changed the global economic outlook for the foreseeable future”.

“Lower asset prices will reduce our recurring fee income, lower interest rates will present a headwind to net interest income, and client activity levels will likely decrease, affecting transaction-based income,” it stated.

Recently, UBS along with its rival Credit Suisse, bowed down to regulatory pressure and decided to delay paying out a portion of 2019 dividends.