UBS results show rising profits, but bank warns on threat of protectionism

CEO
Sergio Ermotti of Swiss bank UBS smiles as he speaks at the
annual news conference in Zurich, Switzerland January 22,
2018.

REUTERS/Arnd
Wiegmann

• UBS sees profits jump 9% in the second quarter, well
  ahead of analyst expectations.
• The Swiss bank made a net profit of 1.3 billion
  Swiss francs ($1.31 billion) in the quarter.
• It did, however, warn that rising protectionism and
  geopolitical tensions pose a threat going forward.

LONDON — Swiss banking giant UBS on Tuesday
reported a strong set of results for the second quarter of the
year, but warned that rising protectionism and geopolitical
tensions pose a threat to the financial sector as a whole going
forward.

Profits at the lender — which is in the midst of an adjustment of
its business which will see it focus more on its wealth
management operations — rose by 9% in the second quarter of 2018,
compared to the same period last year.

That meant a net profit of 1.3 billion Swiss francs ($1.31
billion), above analysts expectations. A Reuters poll of analysts
before the release expected profits of 1.044 billion
Swiss francs ($1.05 billion).

Pre-tax profits at the bank also outperformed expectations,
climbing 12% to 1.7 billion Swiss francs ($1.71 billion),
compared to analyst forecasts of 1.418 billion ($1.43
billion).

The solid results were largely down to the performance of
its key wealth management business, the bank said. Profits before
tax in that area rose 18% to 1.037 billion Swiss francs ($1.04
billion).

That performance, the bank said, was “driven by
double-digit PBT growth in the Americas and the ultra-high net
worth segment, and ten-year records in recurring net fee, net
interest income, lending and mandate penetration.”

“I’m pleased with the second quarter, which contributed to a
strong first half, with particularly good capital generation,”
Sergio Ermotti, the bank’s chief executive said in a statement.

“We’ll keep our focus on growth and efficiency, and continue to
build on the strengths of our global franchise.”

However, while things look strong for UBS, the bank did warn
about two looming global threats that could derail its progress.

“Global economic growth prospects continue to provide a
supportive backdrop to markets, although ongoing geopolitical
tensions and rising protectionism have dampened investor
confidence and remain a threat,” the bank said in a statement.

Although not explicitly stated, it is likely that the “rising
protectionism” mentioned by the bank references the escalating
trade war kicked off by US President Donald Trump. Analysts at
the bank earlier this month
argued that investors are underestimating the potential impact of
the trade war.

Regardless of that warning, investors in UBS were buoyed by the
results on Tuesday morning, with the bank’s stock jumping almost
4% in early morning trading. By 8.20 a.m. BST (3.20 a.m. ET)
shares were up 3.14% to trade at €15.77 ($15.86) each.