UBS reported fourth quarter and full-year earnings.
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UBS beat market expectations with its latest results on the back of lower expenses and higher interest rates. But the lender’s revenues declined because of weaker client activity.
The bank reported $1.7 billion of net income for the fourth quarter of last year, bringing its total annual profit to $7.6 billion in 2022. Analysts had expected UBS would achieve a net income of $1.3 billion in the fourth quarter and of $7.3 billion for the year, according to Refinitiv data.
Looking ahead, the Swiss lender said that revenues for the first quarter of 2023 are set “to be positively influenced” by higher client activity and interest rates, as well as by the easing of Covid-19 restrictions in Asia.
“We delivered good full-year and solid fourth-quarter results in a difficult macroeconomic and geopolitical environment,” CEO Ralph Hamers said in a statement.
Here are a couple of highlights from the latest release:
- CET 1 capital ratio, a measure of bank solvency, stood at 14.2%, down from 14.4% in the previous quarter;
- Revenues dropped to $8.029 billion from $8.705 billion a year ago;
- Return on tangible equity, a measure of bank’s performance, rose to 13.2% at the end of the quarter, up from 10% a year ago.
Among the bank’s units, Global Wealth Management posted a fourth-quarter net interest income increase of 35% on the year, given higher deposit margins off the back of higher interest rates. Personal and Corporate Banking also recorded a 21% year-on-year hike in net interest income over the same period, as a result of higher interest rates and loan revenues.
But market uncertainty hit the investment banking and asset management arms of the business. The former saw a 24% yearly drop in revenues, whereas asset management revenues fell by 31% year-on-year due to the “negative market performance and foreign currency effects.”
“The rate environment is helping the business on one side, and that offsets some of the lower activity that we see on the investment side,” Hamers told CNBC’s Geoff Cutmore on Tuesday.
He added that, following the first half of last year, there was a shift in the markets that put pressure on the investment side of the bank.
“We saw a move from what we would call micro focus, which is equity focused, to macro focus, which is rates focused,” he said, noting that the Swiss bank was not able to benefit from that transition as much as some of its peers, given its smaller presence in the U.S.
UBS said it will be purchasing more shares this year.
“We remain committed to a progressive dividend and expect to repurchase more than $5 billion of shares in 2023,” Hamers said in a statement.
However, the Swiss bank is cautious about the economic outlook, citing central bank activity as a potential catalyst for market volatility.
“While inflation may have peaked in the second half of 2022, and an energy crisis in Europe seems likely to be averted, the outlook for economic growth, asset valuations and market volatility remains highly uncertain, and central bank tightening may have an impact on market liquidity,” the bank said in its latest results.
UBS shares are up by about 15% over the last 12 months.