UBS earnings for the fourth quarter and fiscal year 2022

UBSFourth-quarter earnings beat market expectations, but the Swiss banking giant reported a drop in revenue on weak customer activity and warned of an “uncertain” year ahead.

The bank reported net income of $1.7 billion for the fourth quarter of last year, bringing its full-year profit to $7.6 billion in 2022. Analysts had expected UBS to report net income of $1.3 billion in the fourth quarter and $7.3 billion for the year. , according to data from Refinitiv.

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The bank’s global wealth management unit reported a 35% increase in net interest income for the fourth quarter over the year, due to higher deposit margins on the back of higher interest rates. The Retail and Corporate Banking Division also recorded a 21% year-on-year rise in net interest income during the same period, as a result of higher interest rates and loan income.

But market uncertainty has hit the company’s investment banking and asset management arms. The former saw revenue decline 24% year-on-year, while asset management revenue fell 31% year-on-year due to “negative market performance and foreign exchange effects.”

“The price environment is helping the business on one side, and that offsets some of the lower activity that we’re seeing on the investment side,” CEO Ralph Hammers told CNBC’s Jeff Cutmore on Tuesday.

UBS reported fourth quarter and full year earnings.

Fabrice Coverini | Afp | Getty Images

He added that there is a shift in the markets that put pressure on the investment side of the bank.

“We’ve seen a transition from what we call a micro focus, which is focused on equities, to a macro focus, which is a focus on prices,” he said, noting that the Swiss bank was not able to benefit from that shift as much as some of its peers, given its smaller presence in the US.

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Here are some other highlights from the results:

  • The Tier 1 capital ratio, a measure of a bank’s solvency, was 14.2%, down from 14.4% in the previous quarter;
  • Total revenue fell to $8 billion from $8.7 billion a year ago;
  • Return on tangible equity, a measure of banks’ performance, rose to 13.2% at the end of the quarter, from 10% a year ago.

‘Uncertain’ future outlook

Looking ahead, the Swiss lender said revenue for the first quarter of 2023 is set to be “positively affected” by higher client activity and interest rates, as well as by the easing of Covid-19 restrictions in Asia.

However, he was cautious about the broader economic outlook, citing central bank activity as a potential catalyst for market volatility.

“While inflation may have peaked in the second half of 2022 and an energy crisis appears likely to be averted in Europe, the outlook for economic growth, asset valuation and market volatility remains highly uncertain, and central bank tightening could have an impact on the market. Liquidity,” the bank said in its earnings statement.

UBS said it will buy more of its shares this year.

“We remain committed to a gradual dividend payment and expect to repurchase more than $5 billion in shares in 2023,” Hammers said in a statement accompanying the results.

Shares in the bank have risen about 15% over the past 12 months.

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