UBS Sees Best Net Profit in 15 Years in 2022 Q1

Investment banking company UBS (SWX: UBSG) has exceeded expectations in 2022 Q1, with a net profit of $2.136 billion attributable to shareholders. The Q1 profit is also the best UBS has reported in the last 15 years. The Swiss bank had earlier compiled predictions of about $1.79 billion.

Additionally, the net profit UBS announced for 2022 Q1 represents a 17% jump from the 2021 Q1. This also came after a quarterly net profit drop at the end of the year to $1.35 billion. Specifically, UBS’s operating income for the quarter was $9.36 billion, higher than the $8.71 billion a year ago. Return on tangible equity, which measures profitability, was 15.6%, a 2% increase year-over-year. CET 1 ratio also stood at 14.3%.

UBS has reduced its exposure to Russia from “limited,” as it previously said. The company said it lessened its exposure to Russia from $0.6 billion at the end of 2021 to $0.4 billion as of the 31st of March. Speaking further, the bank said it does not have any material exposure to either Ukraine or Belarus. UBS added that it is also not involving itself in any new businesses with Russia or in Russia.

UBS Beats Expectations in 2022 Q1

While announcing the 2022 Q1 result, UBS stated the factors that caused uncertainties during the quarter. The Swiss bank referred to macroeconomic, geopolitical, and market factors. In addition, UBS said Russia’s invasion of Ukraine and the pandemic restrictions and lockdowns also affected its performance in Q1 of 2022. Furthermore, the investment banking company mentioned increased volatility, inflation, and the economic conditions are factors that caused a” high level of uncertainty in the first quarter.” UBS CEO Ralph Hamers confirmed to CNBC that “it is pretty unpredictable out there.” Governments’ response to higher inflation will affect banks positively or negatively.

“The ECB will closely look at what the [US Federal Reserve] is doing and the Fed is ahead of the ECB. But also, [it’s] a bit late, let’s be honest. So the ECB is a little bit late as well, because they don’t want to… be faster than the Fed.”

Hammers added that expectations are high that there would be the first hike in rate as the year comes to an end. UBS Chief Financial Officer Kirt Gardner told analysts:

“Entering the second quarter, clients have generally remained cautious with activity levels reflective of continuing geopolitical and macro uncertainty. Looking ahead, we anticipate this to persist, especially in Asia, given the added effects of COVID-related lockdowns.”

Wall Street banks are under pressure with higher inflation and Russia’s invasion of Ukraine. Credit Suisse is still struggling with its legal troubles, which started in February. The bank flagged an anticipated Q1 loss last week despite the legal issues and the Russia-Invasion war. Similarly, HSBC (NYSE: HSBC) warned about the negative effect of rising inflation and economic weakness.