UBS registers 40% increase in net profit in Q1 2020

UBS has just posted a set of solid financial results for the first quarter of 2020, with net profit staging a steep increase over the equivalent period a year earlier.

Net profit attributable to shareholders was approximately $1.6 billion, up 40% from a year earlier. Diluted earnings per share for the first quarter were $0.43, up 43% from the year-ago quarter. UBS notes that its first quarter 2020 results reflect high client transaction volumes in Global Wealth Management and the Investment Bank.

UBS’s first quarter pre-tax profit was $2,008 million, up 30% from a year earlier. The cost/income ratio was 72.3%, a 6 percentage point improvement in annual terms. Return on CET1 capital was 17.7%. Total net credit loss expenses amounted to $268 million, of which $122 million in the Investment Bank, $77 million in Personal & Corporate Banking, $53 million in Global Wealth Management, and $16 million in Non-core and Legacy Portfolio.

Global Wealth Management saw operating income rise by 14% in the first quarter of 2020, with consistently high revenues in each month, resulting in the highest level since the financial crisis. The segment registered a 46% improvement in transaction based income, with net interest income up 2% on higher lending revenues, and despite further pressure on interest rates.

Asset Management saw operating income increase by 15% on the back of strong performance with both higher management and performance fees. Net management fees increased by 14%, reflecting higher average invested assets as well as continued positive momentum in net new run rate fees. Performance fees increased by $9 million.

Investment Bank (IB) marked a 242% jump in pr-tax profit in the first quarter of 2020. Global Markets revenue increased by 44% or $619 million, due to significantly higher volumes and volatility, particularly in Foreign Exchange, Rates and Cash Equities revenues, reflecting the impact of the COVID-19 pandemic on client activity levels. Global Banking also rose 44% or $164 million, reflecting the closing of a number of large transactions in Advisory and higher Equity Capital Markets revenues. Mark-to-market losses in Capital Markets were offset by gains on related hedges.

On the downside, Group Functions loss before tax was $410 million, including income in Group Treasury from accounting asymmetries (which tend to mean-revert to zero over time) including hedge accounting ineffectiveness of net negative $167 million and valuation losses in Non-core and Legacy Portfolio of $143 million on auction rate securities.