UBS kicked off the earnings season for European lenders with a revenue enhance of greater than 200% in its funding financial institution, as chief govt Ralph Hamers promised to extend its share buyback programme.
The Swiss financial institution beat analyst expectations with pre-tax earnings of $8.2bn for 2020, a 47% improve on the earlier yr as fourth-quarter earnings surged by 122%. Whereas its prized wealth administration unit was a key driver of improved efficiency, its funding financial institution posted earnings of $2.5bn for the yr, a 217% improve on 2019.
UBS was bolstered by smaller mortgage loss provisions than its Wall Avenue friends, as banks have been compelled to place apart billions in potential mortgage losses attributable to the Covid-19 pandemic. The Swiss financial institution put apart $694m for mortgage losses, with simply $66m within the ultimate quarter of the yr — in comparison with analyst expectations of $159.5m.
The financial institution mentioned it supposed to extend its share buybacks to CHF4bn ($4.5bn) over the following three years together with $1.1bn within the first quarter of 2021.
Hamers heralded improved efficiency throughout all enterprise strains, saying the 2020 outcomes “clearly reveal the true energy of our franchise and the dedication of our workers”.
“It was a difficult yr for our purchasers, for our colleagues, and for our communities alike, which makes these outcomes much more gratifying,” he mentioned.
The fourth quarter is the primary reporting season with Hamers, who took cost in September, on the helm. He’s dealing with a Dutch probe into money-laundering at his former employer ING, which is casting a shadow over his first few months in cost. Chairman Axel Weber has backed the chief govt, however the investigation is more likely to stretch into 2022.
European banks are usually anticipated to battle to match the efficiency of their Wall Avenue rivals inside their funding banks, as Wall Avenue companies have eaten up market share through the pandemic.
Regardless of the surge in earnings in its funding financial institution, UBS’s markets enterprise — which was shrunk below former funding financial institution boss Andrea Orcel — delivered a 33% improve in revenues to $7.1bn. Markets revenues elevated by 41% at JPMorgan in 2020 and by 43% at Goldman Sachs, as fastened revenue desks delivered large progress.
In share phrases, nonetheless, UBS has delivered massive progress in its fastened revenue unit, which was the goal of cuts throughout Orcel’s 2012 shake-up. Revenues elevated by 69% to $2.6bn, bigger progress than Wall Avenue rivals, whereas its equities buying and selling unit elevated by 18.5% to $4.5bn.
Conventional funding banking companies have loved document charges throughout 2020, with each Goldman Sachs and JPMorgan unveiling new highs for the enterprise through the yr. UBS’s international banking enterprise posted a 23% improve in revenues of $2.4bn.
Within the early days of the pandemic, a rush to safe important liquidity led to a surge in capital markets exercise, whereas massive M&A offers remained largely on the sidelines. Within the latter half of 2020, nonetheless, M&A volumes surged by over $1trn in each the third and fourth quarters, as urge for food for offers returned. UBS’s advisory unit was down by 11.5% to $707m for the yr, however up by 32% within the ultimate three months of the yr.
Compensation prices on the Swiss financial institution elevated by 10% to $10.5bn, as banks are usually anticipated to be comparatively frugal with bonus funds even within the wake of improved efficiency.
UBS warned on the continuing impression of Covid-19 in a press release on its outlook, however added that the primary quarter was more likely to be constructive for its enterprise.
“We count on our revenues within the first quarter of 2021 to be positively influenced by seasonal elements equivalent to increased consumer exercise, in contrast with the fourth quarter of 2020,” it mentioned.
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