By John Letzing
ZURICH-UBS Group AG posted a second-quarter profit that exceeded
forecasts led by its wealth-management business, and said it is in
a comfortable position despite impending new capital requirements
and volatile markets.
Zurich-based UBS, which had been scheduled to report its results
Tuesday, said Monday that net profit rose to 1.21 billion Swiss
francs ($1.26 billion) in the quarter, up from the year-earlier 792
million francs and substantially greater than the 878 million
francs analysts expected.
Operating income rose to 7.82 billion francs from 7.15 billion
francs, UBS said.
UBS said it published its results early "to be transparent and
counter certain incorrect and misleading information that has
become public." A Swiss newspaper, citing anonymous sources,
published a report Sunday that included an inaccurate figure for
the bank's second-quarter profit.
Shares of UBS fell about 1%, amid broad declines for European
markets.
UBS said its key capital ratio was 14.4% in the second quarter,
compared with 13.7% in the first quarter. The ratio is a closely
watched measure of the bank's stability and ability to return cash
to investors-and has drawn scrutiny with Switzerland likely to
implement more stringent capital requirements for its big
banks.
UBS and other banks are expected to gain some clarity about new
Swiss capital requirements by the end of this year.
Andreas Venditti, an analyst at Vontobel, said UBS's capital
position is impressive, particularly in comparison with that of
Swiss rival Credit Suisse Group AG. "It is really a very big
difference between the two," Mr. Venditti said. Last week, Credit
Suisse reported a capital ratio of 10.3%.
Overall, the analyst said that UBS's results were "solid."
During a conference call with analysts, UBS Chief Executive
Sergio Ermotti said the bank is enjoying "a unique period of
strategic clarity."
Pretax operating profit at UBS's flagship wealth-management
business more than doubled in the quarter, to 756 million francs.
The bank said the result came even as clients curbed activity due
to market turbulence. As at other Swiss banks, UBS's European
clients have recently been withdrawing funds as they declare their
Swiss accounts to tax authorities at home. However, UBS has
compensated by focusing on emerging markets such as Asia.
UBS said on Monday that net new money for the wealth-management
business was 1.8 billion francs in the quarter. That figure was
depleted by an effort at the bank to jettison clients with cash
deposits that had become costly for UBS to maintain, after
Switzerland's central bank recently adopted negative interest
rates. On an adjusted basis, stripping out the impact of those
outflows, net new money was 8.4 billion francs, UBS said.
UBS's wealth-management business in North America showed
outflows in the quarter, the bank said, as pretax operating profit
fell 14%. The unit's results were affected by client obligations to
pay income taxes in the period, and by litigation provisions, UBS
said. The bank has faced legal issues in Puerto Rico, related to
its promotion of funds tied to bonds issued by the island that
declined in value.
Pretax operating profit at UBS's investment bank fell 2% to 551
million francs, as operating income rose 4%.
UBS maintains a smaller investment bank than other global
lenders, measured by risk-weighted assets. UBS has trimmed its
operation by dumping unwanted business into a "noncore and legacy
portfolio," from which it is sold off. That portfolio held 31.6
billion francs in risk-weighted assets in the second quarter, UBS
said, down 39% from the same period last year.
UBS's adjusted return on tangible equity, a measure of
profitability closely watched by investors, stood at 9.6% in the
second quarter. The bank has previously said it hopes to increase
it to more than 15% by next year.
Write to John Letzing at john.letzing@wsj.com
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