Earnings

UBS posts 27% fall in net profit after a 'very challenging quarter'

Key Points
  • Net income for the first quarter came in at $1.1 billion, versus $848 million expected in a Reuters poll of analysts.
  • However, this was lower than the $1.57 billion reported this time last year in what was a strong quarter for the bank.
  • CEO won't comment on reports of a potential deal with Deutsche Bank's asset management arm.
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UBS reported a 27% fall in net profit for its first quarter, compared to the same period the year before, with the Swiss bank citing challenging market conditions.

Net income for the first quarter came in at $1.1 billion, versus $848 million expected in a Reuters poll of analysts. However, this was lower than the $1.57 billion reported this time last year in what was a strong quarter for the bank.

Here are the other key highlights of the first quarter of 2019:

  • Operating income of $7.2 billion, versus $8.2 billion a year ago.
  • Return on tangible equity of 9.8%, versus 13.5% a year ago.
  • Common equity tier 1 capital ratio of 13%, versus 13.1% a year ago.

Sergio Ermotti, the group's chief executive officer, told CNBC Thursday that it was a "very challenging quarter" but he was "pleased" with the resilience of the results, nonetheless.

The bank's wealth management division and its investment banking unit saw much lower operating profits than in the first quarter of 2018. The former registered an operating profit of $873 million, versus $1.1 billion a year ago.

In investment banking, operating income fell to $221 million from $619 million a year ago. UBS said this was caused by the challenging trading environment, mainly in Europe and Asia.

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Speaking to CNBC's Joumanna Bercetche, Ermotti also said the bank outperformed in 2018 and this would have accentuated the 64% drop in profits at the investment banking unit. "Last year, we outperformed all our peers across the board, and therefore the year-on-year comparison is quite challenging to us," he said.

Despite a tough start in 2019, UBS expects economic growth and market performance to recover and stabilize in the coming months. "We are likely to benefit from this environment ... Higher invested assets are expected to lead to an increase in recurring revenues in Global Wealth Management and Asset Management, compared with the first quarter of 2019," the bank said in a statement.

Ermotti confirmed to CNBC Thursday that the Swiss bank aims to repurchase up to $1 billion in shares this year, as announced at the end of 2018.

Shares rose 1.4% in early deals. 

Talks with Deutsche Bank?

Media reports have suggested this week that UBS is in talks with the asset management division of Deutsche Bank about a potential merger. Ermotti told CNBC that he would not comment on the reports.

"We don't comment on rumors. I think our asset management business has been going through a huge transformation, it's very successful in its business areas ... it's no surprise that there are rumors around the asset management industry, but we don't comment on specific rumors," he said.

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