By
Bhushan Akolkar
April 12th, 2024
Leading bank UBS ascribes the less-than-stellar showing in its Q2 2022 report to a challenging period and dwindling client activity.
Swiss banking giant UBS has released its anticipated Q2 2022 earnings report, which shows a less-than-expected net profit sum. Citing one of the most challenging quarters for investors in a decade, UBS posted a net profit attributable to shareholders of $2.108 billion. This came in saliently lower than the general consensus estimates of $2.403 billion for the period ended June 30th.
In addition, UBS wealth management and investment banking divisions also took a hit amid declines in equity and fixed income markets. The Swiss multinational investment bank and financial services company experienced dwindling client activity in these divisions for the quarter. Commenting on the Q2 2022 showing, UBS chief executive officer Ralph Hamers explained in a statement:
“The second quarter was one of the most challenging periods for investors in the last 10 years. Inflation continues to be high, the war in Ukraine is ongoing, as are strict Covid policies in parts of Asia. In these uncertain times, our clients rely on our powerful ecosystem to navigate markets and invest for the long term.”
Furthermore, despite the wealth management division setback, Hamers stated that the bank largely made up for the deficit in rising interest rates. The US Federal Reserve has been increasing interest rates as part of an aggressive anti-inflation policy. As a result, according to Hamers:
“…you see a 24% uptick in net interest income on the back of rising rates, and as a consequence of that, the overall revenues in the wealth management business for the quarter were only -2% in very difficult circumstances.”
Closer Look at UBS Q2 2022 Performance
UBS’ total revenues for Q2 came in at $8.917 billion, compared to $8.897 billion for the same period last year. In addition, the leading European-based bank also reported a return on tangible equity of 16.4% compared to 15.4% year-over-year (YoY). Furthermore, UBS’ Q2 2022 CET 1 capital ratio, which measures the bank’s solvency, now stands at 14.2%. The bank posted a CET 1 capital ratio of 14.5% for the same period last year.
UBS’ investment banking revenues for the period ended June 30th sit at $2.094 billion, representing a 14% decline YoY. Furthermore, the leading Swiss bank’s report also highlighted a $1.121 billion fall in net fee and commission income. This mainly reflects the aforementioned declines in wealth management and investment banking services, in addition to equity capital markets. The UBS report also revealed a decrease in revenues from merger and acquisition transactions for the second quarter.
Rough Roads Still Ahead for UBS, Analysts Say
In light of its underperformance for Q2, analysts predict that UBS would also experience substantial challenges in the second half of 2022 as well. The reason for this is the stagnating eurozone economy as well as rising interest rates. In addition, analysts also expect the ongoing Russian war in Ukraine to weigh heavily on UBS’ operations for the rest of 2022.