UBS Group AG shares slumped after weaker-than-expected profit in the second quarter, as the global market sell-off kept wealthy clients on the sidelines and institutional investors pulled funds.
The Zurich-based bank reported net income of $2.1 billion, compared with analyst estimates of $2.4 billion. The quarter was impacted by lower revenues at the key wealth management business, outflows in asset management and investment banking results that also trailed expectations.
Global banks are confronting the reality of surging prices and slowing economic growth, while lockdowns in China have hurt demand for trading and investment products. While Zurich peer Julius Baer Group Ltd. this week signaled optimism that the “worst is through” for the equities sell-off, UBS said it expects client nervousness to persist.
“We saw private clients, given all the uncertainty, sidelining their money and waiting for things to clear up,” Chief Executive Officer Ralph Hamers said in an interview with Bloomberg Television’s Manus Cranny. Earlier, he called the second quarter “one of most challenging periods for investors in the last 10 years.”
UBS shares were down 7.3% as of 12:58 in Zurich.
“UBS is underperforming US peers so far both on the investment banking side as well as Morgan Stanley in US wealth management performance,” JPMorgan analysts led by Kian Abouhossein said in a note to investors. “The CEO outlook statement is still muted. So, today, UBS should underperform the market.”
The Swiss bank posted pre-tax profit for its wealth management business of $1.16 billion, weighed down by a slump in client trading activity particularly in the Americas and Asia. While Asia posted stronger inflows that could signal an activity rebound ahead, overall net new fee-generating assets were muted.
The asset management division suffered $12.1 billion in outflows as investors exited equities during the turbulent quarter. The unit’s revenue included a gain from the sale of UBS stake in a Japanese real-estate venture partly held with Mitsubishi Corp.
UBS’s investment bank, which is heavily geared toward equities, posted profit before tax of $410 million in the second quarter, compared with analyst estimates for income of about $511 million. Trading revenue was up 4%, after the effects of last year’s default of Archegos Capital Management were accounted for.
UBS also cited lower compensation costs at the investment bank, as the market declines cool what had been a fierce bidding contest for talent.