Trading boom pushes UBS to best third quarter in a decade

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·3-min read
UBS logo at World Trade Organization HQ in Geneva. Photo: Fabrice Coffrini/AFP via Getty Images

Profit at Swiss bank UBS (UBSG.SW) surged in the third quarter, helped by strong performances at its investment bank, asset management business, and private wealth division.

UBS on Tuesday said pre-tax profit rose by 92% to $2.6bn (£2bn) in the third quarter of 2020. On an adjusted basis, pre-tax profit was up 41% to $2.1bn. It marked the bank’s best quarterly performance in a decade and was ahead of forecasts.

Pre-tax profit at UBS’ investment bank surged by 268% to $632m. Markets revenue rose by 42% in the quarter as stock market volatility led to more trading by clients. Corporate customers tapped equity markets to raise additional funds, helping global banking revenue rise 44% to $198m.

UBS’ asset management arm also performed strongly. Pre-tax profit rose 495% to $739m, although the bulk was driven by the sale of its fund distribution platform Fundcenter. Once that was stripped out, asset management profit was up 42% to $191m.

Watch: What is a V-shaped economic recovery?

READ MORE: Billionaire wealth smashes records during COVID-19

Pre-tax profit at UBS’ global wealth management division — the biggest part of its business — rose 18% to $1bn. The division enjoyed record breaking performance in Asia and America, and had its third best quarter overall since 2011. Earlier this month UBS said the wealth of global billionaires hit new record highs during the pandemic.

The one blip for UBS during the quarter was its personal and corporate banking division, which focuses on lending to people and businesses in its native Switzerland. Pre-tax profits fell by 13% to SwFr 305m, driven by rising credit losses.

Sergio Ermotti the CEO of Swiss banking giant UBS addresses the annual results news conference on January 22, 2018 in Zurich. - Swiss banking giant UBS reported on January 22, 2018 that its profits plummeted 63 percent last year due to US tax reforms that hit fourth-quarter earnings. (Photo by MICHELE LIMINA / AFP)        (Photo credit should read MICHELE LIMINA/AFP via Getty Images)
Sergio Ermotti, CEO of Swiss banking giant UBS. Photo: Michele Limina/AFP via Getty Images

“Our third quarter results continue to demonstrate that our strategy is differentiating us as we continuously adapt and accelerate the pace of change,” chief executive Sergio Ermotti said in a statement.

“I am proud of the contributions all of our employees have made day in and day out over the years, particularly in the current challenging environment.”

UBS said it would pay out a dividend of $0.365 per share next month and set aside $1.5bn for potential share buybacks moving forward.

Shares rose 2% in early trade in Zurich.

UBS shares rose in early trade on Tuesday. Photo: Yahoo Finance UK
UBS shares rose in early trade on Tuesday. Photo: Yahoo Finance UK

The bank said the recent uptick in COVID-19 cases around the world “could affect the path of recovery” moving forward. UBS warned that political uncertainty around the world meant: “The range of possible outcomes remains wide, making reliable predictions difficult.”

However, UBS said its current lending exposures meant credit losses for the fourth quarter were likely to be “markedly lower than in the first half of the year”.

Ermotti is set to be replaced as UBS chief executive by former ING leader Ralph Hamers at the start of next month.

“UBS has all the options open to write another successful chapter of its history under Ralph’s leadership,” Ermotti said.

Analysts at Barclays said there was “little to quibble with” in UBS’ results.

Watch: What are negative interest rates?