By
Bhushan Akolkar
April 12th, 2024
According to UBS, it expects a better Q1 as a result of the growing impact of the interest rate slowdown, as well as the easing of COVID-19 restrictions in China and other Asian countries.
In furtherance of the ongoing earnings report, Swiss multinational banking giant, UBS Group AG (SWX: UBSG) has posted better-than-expected revenue for both its fourth quarter (Q4) 2022 and the fiscal year. According to the firm, its revenue for the quarter came in at $1.7 billion as against the $1.3 billion projected by analysts polled by Refinitiv. The news has impacted the price of UBS shares.
The fiscal full-year revenue for 2022 came in at $7.6 billion, a figure that is significantly more than the $7.3 billion projected by analysts. Different units of the firm performed in varying degrees with the Global Wealth Management arm recording a 35% net interest income year-on-year.
Just like other financial institutions, the UBS business took a big slump in the past year as sky-high inflation rates pushed central banks around the world to hike interest rates that definitely reduced borrowing from firms. As a result of this, UBS recorded a significant plunge in both its investment banking and asset management units respectively.
The asset management offshoot saw a 31% drop when compared to the same period last year as a result of “negative market performance and foreign currency effects.”
“The rate environment is helping the business on one side, and that offsets some of the lower activity that we see on the investment side,” CEO Ralph Hamers said in an interview with CNBC.
The company said the tapering down of interest rates had a direct impact on its overall productivity for the previous quarter. It, however, revealed that it benefitted quite little compared to its peers as a result of its reduced presence in the United States.
The shares of UBS are trading at a loss at the time of writing. It is down by 2.92% to 19.27 CHF. The company has a better share performance as it is up by over 15% over the past year.
UBS Shares Slump Fueled by Bearish Outlook Projection
According to UBS, it expects a better Q1 as a result of the growing impact of the interest rate slowdown, as well as the easing of COVID-19 restrictions in China and other Asian countries. Amidst these conservative projections, investors showed uncertainty as a result of the Central Bank’s activities which may drive market volatility across the board.
“While inflation may have peaked in the second half of 2022, and an energy crisis in Europe seems likely to be averted, the outlook for economic growth, asset valuations, and market volatility remains highly uncertain, and central bank tightening may have an impact on market liquidity,” the bank said its earnings release.
UBS has a number of initiatives that are billed to help it recoup some of its shares through a targeted share buyback program.
“We remain committed to a progressive dividend and expect to repurchase more than $5 billion of shares in 2023,” Hamers said in a statement accompanying the results.