(Bloomberg) — UBS Group AG leaned on its investment bank to post better-than-expected profit in the first quarter after its key wealth management business was hit by slowing client activity and rising costs.
The Zurich-based bank reported net income of $2.1 billion, compared with an analysts’ estimate of about $1.9 billion, after the volatility caused by Russia’s invasion of Ukraine drove revenue at the trading unit to a record. Earnings at the private banking unit missed estimates after transaction-based income slumped 19% as clients in the Asia Pacific region pulled back.
UBS is giving the first insight into how European banks are navigating the turmoil caused by the geopolitical crisis and the reaction of clients to headwinds includes soaring inflation and rate increases. While rich clients are more cautious because of the economic and market outlook, investment banks are seeing a resurgence of trading conditions in both fixed income and equities.
Read More: UBS Chairman Sees No Future in Russia as Bank Unwinds Trades
“The first quarter was dominated by extraordinary geopolitical and macro events,” UBS Chief Executive Officer Ralph Hamers said in a statement on Tuesday. “With volatile markets driving trading volumes, we facilitated high volumes of trades, managed risks and provided access to liquidity.”
UBS’s investment bank — weighted most heavily to equities — posted profit before tax of about $929 million, compared with analysts estimates for income on that basis of about $612 million. Global markets revenue increased about 4% when excluding a year earlier loss of $774 million related to the collapse of U.S. family office Archegos Capital Management. Equity derivatives, rates and foreign exchange helped drive the gain.
The global wealth management business saw results clouded by a slowdown in client activity and rising costs to pay its financial advisors. Loans also decreased on a sequential basis as did invested assets. One bright spot in the unit’s results was net new fee generating assets of $19.4 billion.
Hamers is boosting shareholder returns and pursuing growth through digitalization and seeking to reach a broader category of wealthy clients. In line with many peers following the invasion of Ukraine, the bank has been winding down business in Russia and says it isn’t pursuing new customers there.
The bank, along with European banking peers, is buying back as much as $6 billion of stock over the next two years, aided by a robust performance during the pandemic. Many European lenders are increasing buybacks and dividends after seeing lower loan losses than expected and benefiting from a surge in trading and deal-making, though the situation in Ukraine has raised questions about how sustainable the shareholder returns may be for some of the most exposed lenders.
Read More: UBS Shares Jump as Earnings Beat Fuels Boost to Buyback, Targets
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