UBS Group AG posted a robust quarter on the back of surging rates and cost control, enabling the Swiss bank to confirm a plan to return around $5.5 billion to investors this year.
Shares rose the most since June after UBS said net income in the three months to September was $1.73 billion, compared with analyst estimates of $1.57 billion. The wealth management unit saw lending revenue jump amid client inflows of $17.1 billion, while investment-banking revenue slumped.
The response to inflation by central banks in the US and Europe is giving banks a tailwind in lending revenue, helping to maintain ambitious dividend and buyback plans even as the economic outlook darkens. Global banks are nevertheless seeing equities and deal-making revenue hurt by the energy crisis, Russia’s war in Ukraine and the slowdown in China’s economy.
Ralph Hamers in London on Oct. 24. (Bloomberg)
UBS Chief Executive Officer Ralph Hamers is leading an effort to boost automation, slim down management ranks and expand the lender’s presence in the US where it is eclipsed by local rivals. He faced a major setback in September when the bank announced it was pulling out of a deal to buy US robo-advisor Wealthfront.
UBS rose as much 6% and traded at 16.02 Swiss francs as of 1:17 p.m. in Zurich. The bank said Tuesday that share buybacks should reach about $5.5 billion this year, adding detail to previous guidance of more than $5 billion.
“The macroeconomic and geopolitical environment has become increasingly complex,” Hamers said in the earnings release on Tuesday. The global uncertainty “may also affect client activity levels in the fourth quarter,” he warned.
At US peers, revenue and earnings were up in most cases, beating analysts expectations. But with the the prospect of a recession edging closer, US banks are starting to prepare with higher loan provisions. JPMorgan Chase & Co added $808 million to its loan provisions, whilst Wells Fargo set aside $784 million. By contrast, UBS released credit-loss provisions of 15 million Swiss francs ($15 million) in the personal and corporate banking unit.
U.S. Plans
Hamers insisted that the bank’s overall growth strategy for the US hadn’t been affected by the termination of the $1.4 billion Wealthfront deal, which had been poised to push the bank into a broader, digital segment of wealth management. The exit in September followed a rout in tech stocks that made the earlier valuation appear unfavorable for the bank.
“A change in tactics is absolutely not a change in strategy,” Hamers said in a Bloomberg Television interview with Manus Cranny. “The strategy was never to do a deal, the strategy was always to grow organically and the opportunities you can look at in terms of accelerating your organic plans.”