UBS has warned that additional turmoil in markets will immediate purchasers to retreat after its second-quarter earnings fell wanting expectations, sending shares on the planet’s largest wealth supervisor down greater than 5 per cent.
The Swiss group’s personal financial institution bore the brunt of a bruising quarter, with pre-tax revenue for the enterprise falling 11 per cent as purchasers “stayed on the sidelines”, UBS mentioned on Tuesday.
In distinction to the primary three months of the yr, when UBS merchants managed to capitalise on the volatility in markets, earnings at its funding banking fell 39 per cent within the second quarter.
General, the group’s pre-tax revenue edged up 1 per cent from a yr earlier to $2.1bn, because the financial institution benefited from an $848mn acquire from the sale of an actual property three way partnership with Mitsubishi. Nevertheless, analysts had predicted UBS would make a revenue of $2.4bn within the quarter.
UBS mentioned it anticipated market circumstances to proceed to trigger traders to tug again from the market, warning this might hamper its third-quarter outcomes.
Shares within the financial institution dropped 6 per cent to SFr15.20 ($15.78) in early buying and selling on Tuesday, having fallen 23 per cent since hitting a seven-year excessive in early February.
“We knew that recurring charges and transaction-based revenues would decline, however they did greater than anticipated,” mentioned Jefferies analyst Flora Bocahut.
The lacklustre efficiency was a reversal from the beginning of the yr, when UBS reported its finest first quarter efficiency since 2007 because the financial institution’s merchants benefited from risky markets and offset a weaker displaying from its wealth managers.
“The second quarter was one of the crucial difficult intervals for traders within the final 10 years,” mentioned UBS chief govt Ralph Hamers. “Inflation continues to be excessive, the conflict in Ukraine is ongoing, as are strict Covid insurance policies in elements of Asia.”
He added: “Institutional purchasers remained lively on the again of excessive volatility. We supported them with recommendation and execution whereas dealing with very excessive volumes. On the similar time, personal purchasers stayed on the sidelines.”
The outcomes from UBS got here a day after Swiss wealth supervisor Julius Baer reported a 26 per cent fall in internet revenue for the primary half of the yr as nervous prospects deleveraged their portfolios and retreated from falling inventory markets.
Credit score Suisse, Switzerland’s second-biggest financial institution, studies earnings on Wednesday, having already warned of losses for the second quarter.
This month, UBS introduced that Iqbal Khan would take sole cost of its wealth administration enterprise when his co-head, Tom Naratil, leaves the financial institution after 39 years in September. Naratil can be head of UBS US operations.
The group’s wealth enterprise suffered $3.5bn of outflows within the US and $500mn in Europe, although Swiss purchasers added $1.1bn to their accounts, whereas there have been $3.3bn of inflows in Asia.
“It’s truthful to say UBS is underperforming US friends up to now each on the funding financial institution aspect in addition to Morgan Stanley in US wealth administration efficiency,” mentioned JPMorgan analyst Kian Abouhossein.
The US market has change into a spotlight for progress for UBS, with Hamers and new chair Colm Kelleher lately embarking on a appeal offensive amongst American traders.