Tuesday 03 May 2016 7:56 am

UBS profits slump as bank warns on future risks

Profits at UBS fell more sharply than expected in the first quarter, as the Swiss lender took a hit on its wealth management business.

The figures

Zurich-based UBS said net profit for the first quarter fell 64 per cent to 707m CHF ($£503m), from 1.98bn CHF in the same period last year. Analysts had expected a net profit of 1.02bn CHF.

Operating income fell to 6.83bn CHF, from 8.84bn CHF, UBS said.

Its wealth management business had net inflows of 15.5bn CHF in the quarter, compared with 14.4bn CHF in the period last year. However, pre-tax operating profit at the division fell 41 per cent to 557m CHF. UBS said clients had been put off from investing amid troubled markets, prompting "abnormally low" activity.

Its wealth management Americas arm attracted 13.6bn CHF in net new money, as it benefited from its Swiss rival Credit Suisse's exit.

UBS' investment bank arm reported a 67 per cent decline in pre-tax operating profit in the first quarter, falling to 253m CHF.

Why it's interesting

UBS is one of many banks to reveal its bruises this reporting season, with the lender warning that some of the factors that have spooked clients and made them more risk-averse “are unlikely to be resolved in the foreseeable future.”

It did add that some of the recent volatility and uncertainty affecting its wealth management business has “stabilised.”

Even UBS' common equity tier one ratio was lower than expected – 14.0 per cent, a drop on the 14.5 per cent ratio at the end of December, and less than the 14.4 per cent analysts expected.

UBS shares have fallen about 15 per cent this year, while Credit Suisse has dropped by 33 per cent.

What UBS said

"Negative market performance, substantial volatility, as well as underlying macroeconomic and geopolitical uncertainty, led to more pronounced client risk aversion and abnormally low transaction volumes in the first quarter," the bank said.