UBS fourth-quarter net profit fell from the equivalent period in 2015 but still surpassed analyst expectations with the Swiss bank on Friday blaming macroeconomics and geopolitics for negatively impacting client sentiment and trading volumes.
Switzerland's largest bank delivered 738 million Swiss francs ($737.3 million) of fourth-quarter net profit, coming in short of last year's comparable 949 Swiss francs, but clearly ahead of a Reuters consensus forecast of 339 million Swiss francs. The higher figure delivered during the same quarter of 2015 had benefited from a net tax benefit of 715 million Swiss francs.
The results on Friday meant that total net profit for 2016 came in at 3.3 billion Swiss francs, a near halving from the 6.2 billion reported last year. On Friday, the company confirmed an unchanged ordinary dividend of 0.60 Swiss francs per share for 2016, in line with expectations.
Speaking to CNBC on Friday, UBS Chief Executive (CEO) Sergio Ermotti said sentiment surrounding the economy and financial markets had improved since the election of President Donald Trump, particularly in the U.S.
"We have data points pointing at clients and investors being more optimistic and ready to be constructive about the situation," he said at the company's headquarters in Zurich.
"They are really looking for concrete actions by the new administration in the U.S. to then go into investing in the markets but what I think is much more important is also potentially investing in their underlying businesses which is really going to boost the economy," the CEO added.
Ermotti described the mood change as a "turning point" brought on by the election as well as a "human desire" to restore a positive outlook after a long period of gloom.
"There is a good momentum but again, we need to see facts and consistency in delivering those structural reforms," he stressed.
Turning to the contentious issue of Brexit and its potential impact on the financial services sector, Ermotti acknowledged that there could be momentous changes ahead.
"We do think there is going to be some significant changes if there is a 'hard Brexit' and a very extreme outcome of these negotiations," he revealed, adding that the bank would take some of the summer to understand its options vis-à-vis the regulatory framework in Europe and what would work best for its corporate structure.
Pressed on whether Frankfurt was the front runner as an alternative or additional European hub, the CEO emphasized that UBS was keeping an open mind.
"Frankfurt is a place where we already have a significant operation and we have already all the licenses to operate. But again, there is not only the Frankfurt option on the table, we have flexibility and will use that flexibility to the fullest extent," he explained.
The CEO picked up on a favored theme of his saying the bigger issue for the European banking system was firms being "too small to survive" rather than "too big to fail", agreeing that "consolidation is part of the future solution to make the banking system more stable and sustainable."
Despite that, Ermotti added, "our preferred option is to continue to grow organically."
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