November 25, 2020

DealBook: UBS Issues Profit Warning on Weaker Economy

Oswald J. Grübel, chief of UBS, said the Swiss bank was likely to Christian Hartmann/ReutersOswald J. Grübel, chief of UBS, said the Swiss bank was likely to “book significant restructuring charges later this year” following a series of cost cuts.

UBS warned on Tuesday that it would probably miss an earnings target set two years ago, after its profit fell by half in the second quarter and the economy weakened.

Profit dropped to 1 billion Swiss francs, or $1.2 billion, in the April-June period, from 2 billion francs in the period a year earlier, the company said in a statement. The weak results came in the wake of a dismal performance at its investment banking unit, where pretax profit slumped to 376 million francs from 1.3 billion francs in the period a year earlier.

UBS, the biggest Swiss bank, said in 2009 that it intended to reach a pretax profit of 15 billion francs by 2014. But the chief executive, Oswald J. Grübel, said on Tuesday that target “is unlikely to be achieved” in the original time frame.

“Banks’ returns have declined over all in the last 12 months, reflecting deleveraging and the actions being taken in advance of increased capital requirements,” he said in the statement.

“We are responding to this changed environment and the weakening economic outlook by adapting our business and increasing efficiency,” he said.

Mr. Grübel added that UBS was likely to “book significant restructuring charges later this year” following a series of cost cuts.

New financial regulation in Britain is expected to reduce earnings at its investment banking unit by about 100 million francs before the end of this year, the bank said.

Mr. Grübel has been focusing UBS on its main wealth management and investment banking activities to repair a bank that was among the hardest hit in the financial crisis.

But some analysts have recently started to doubt Mr. Grübel’s plan would be enough to steer the bank back to strength. Its investment banking unit has continued to struggle and the stricter capital requirements have hurt profitability.

A string of departures by bankers, and lower appetite for risk among clients, have hampered efforts to repair the unit.

UBS said on Tuesday that it planned to cut costs of as much as 2 billion francs over the next two to three years. At the same time, a decline in demand for its services because of a weaker economic outlook is expected to “constrain growth prospects.”

UBS said it attracted 8.7 billion francs in net new money in the second quarter, less than the 22.3 billion francs in the first quarter. Pretax profit at its main wealth management and asset management operations fell in the second quarter from a year earlier, while wealth management in the Americas returned to profit.

Revenue at the entire bank fell 14 percent to 7.2 billion francs.

Article source: http://feeds.nytimes.com/click.phdo?i=bba0309e3d8dd8bda97e66aefc14d421

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