UBS Group AG gave a positive surprise, posting a net profit of $1.692 billion, above consensus expectations, for the first quarter of 2023. This stellar performance is reflective of the success of its investment banking division. The Swiss banking behemoth has been hit by share drops of close to 10% so far this year. This downturn has been aggravated by the fact that Banco Santander took it over. Today, it is no longer the largest bank in continental Europe by market capitalization.
UBS came in at 8.5% return on tangible equity in their first quarter, ttm. This result is proof of their smart, efficient use of capital, despite all the odds against them. The bank’s Common Equity Tier 1 (CET1) capital ratio was a robust 14.3%. This number is a key indicator of the bank’s health and ability to remain solvent and stable.
UBS’s group revenue totaled $12.557 billion in Q1. That stunning figure was largely spurred on by considerable momentum in its global markets unit, which reported a 32% year-over-year spike in revenues. The bank’s net interest income (NII), however, saw a 16% YoY drop to $1.629 billion. This figure showed an 11% drop compared to the prior quarter.
UBS’s predictions for the second quarter reflect cautious optimism, as they anticipate a low single-digit percentage decline in NII within their Global Wealth Management division and a similar decrease for Personal & Corporate Banking’s NII in Swiss francs. However, in USD terms, Personal & Corporate Banking’s NII is projected by UBS to increase sequentially by a mid-single-digit percentage.
“In the second quarter we expect net interest income (NII) in Global Wealth Management to decline sequentially by a low single-digit percentage, and we see a similar decline in Personal & Corporate Banking’s NII in Swiss francs. In US dollar terms, Personal & Corporate Banking’s NII is expected to increase sequentially by a mid-single-digit percentage, based on current foreign exchange rates.” – UBS
UBS has prioritized the strengthening of its investment banking capabilities. The lender noted “higher client activity in equities and FX with gains across all regions” as contributing factors to their improved performance in this sector.
Even amidst these achievements, UBS has a threat looming to its creation and success. A potential 31% duty looms if Switzerland cannot negotiate a more favorable trade deal with the United States by early July. This ill-fated point situation illustrates why intentional and strategic lobbying efforts are just as crucial as the bank’s political regulatory positive surroundings shifting.
Swiss President Karin Keller-Sutter commented on these lobbying efforts, stating, “UBS’s lobbying is both visible and unmistakable. It’s clearly resonating in various places. The Federal Council cannot be intimidated by lobbying, and must represent the interests of taxpayers.”
In addition, as she warned in the Spring, that reform is desperately needed to protect even larger systemically important banks, such as UBS, from requiring bailouts.
“The Federal Council has one goal: that in the event of a crisis, a UBS that is systemically important is resolvable. This means that the systemically important parts of the bank can be separated in Switzerland. That must be the goal of the Federal Council and the new legislation.” – Swiss President Karin Keller-Sutter
UBS has already reshaped its business to fit the new market realities and regulatory environments. The company recognizes the necessity of preserving its leadership role in the global financial markets and its long-term viability. With approximately half of its invested assets concentrated in the broader Americas region, UBS is well-positioned to leverage growth opportunities despite facing challenges at home.